Updated On: 28th July, 2023
It is that time of the year when people visit financial advisors and chartered accountants to file Income Tax Returns and plan investments for the coming financial year. If the financial planning is done in the right manner, you can save a considerable amount of money from your taxable income.
Key Takeaways
- The New Tax Regime allows a standard deduction of ₹50,000 for salaried individuals.
- Family pensioners can claim a deduction of ₹15,000.
- Financial investment does not only lower your tax burden but also ensures future financial wealth.
- Under Section 80DDB, a deduction is provided on the expense of medical treatment of specified ailments.
- A well-planned and calculated investment helps you claim the maximum deduction.
With recent amendments in the tax regime and the introduction of various investment options, it has become easier to save and invest money. Through this blog, we will highlight the lesser-known income tax deductions that can help lower your tax burden.
Deductions Available under New Tax Regime
The New Tax Regime allows a standard deduction of ₹50,000 for salaried individuals. However, family pensioners can claim a deduction of ₹15,000. In addition, there are the following exemptions and deductions included in the New Tax Regime:
- Transport Allowance for specially-abled person
- Interest on a home loan on letting out property
- Deduction for employer’s contribution to NPS Account
- Gifts of up to ₹5,000
- Exemption for Voluntary Retirement Scheme under Section 10(10C)
Do You Know?
Under the budget 2023, the limit for tax exemption on leave encashment on the retirement of non-governmental salaried workers to increase to ₹25 lakhs.
Reduce Your Tax Burden
Financial investment does not only lower your tax burden but also ensures future financial wealth. Hence, it becomes crucial to fill your bucket drop by drop. Therefore, to ensure your income does not get drained away completely on the income tax, here are some deductions that you can claim while filing ITR:
Capital Losses
Capital losses in the stock market can be used to reduce your tax liability. A long-term capital loss can be offset against long-term capital gain, and a short-term capital loss can be adjusted against both short-term as well as long-term capital gains. In case the loss cannot be adjusted, it can be carried forward to the following 8 assessment years.
Investment in National Pension Scheme (NPS)
You have the right to claim benefits over and above ₹1.5 lakh limit by investing in NPS. The benefit is available under Section 80CCD(1B) of the Income Tax Act. However, the maximum amount that can be invested is ₹50,000.
Joint Home Loan Borrowers
If you have taken a joint home loan, then you can claim maximum tax benefit individually. This implies you can get a tax rebate of ₹1.5 lakhs for principal repayment under Section 80C and ₹2 lakhs for interest payment under Section 24.
Disability
In case you suffer from any disability, you can claim a deduction of ₹75,000 to ₹1,25,000 under Section 80U. You can also claim the deduction under section 80DD in case you have disabled dependents.
Medical Treatment
Under Section 80DDB of the Income Tax Act, a deduction is provided on the expenses of medical treatment of specified diseases such as AIDS, cancer, and neurological diseases. The maximum amount of deduction that you can claim from gross total income is ₹40,000.
Education Loan
If you have taken an education loan for higher studies, you can claim a deduction on the interest paid for the loan under Section 80E of the Income Tax Act. the deduction is also available for the loan taken for higher studies of a spouse or children.
Repair and Maintenance of Property
Many people are unaware of the deduction available for the interest paid on a loan taken for the reconstruction or repair of the house property. It qualifies for deduction up to ₹30,000, subject to the overall limit of ₹2,00,000.
Wrapping Up
By now, you must have got at least a few new ideas to claim a deduction and save your hard-earned income. However, financial planning and investment is a year-round process. Hence, you should not restrict your financial moves and action only at the time of filing returns. A well-planned and calculated investment helps you claim the maximum deduction along with long-term financial benefits.
