Can you believe we are already nearing the end of March, the end of another financial year? And this is the final week to finalize our taxes and investments for 2020-21.
If your income is above the basic exemption limit of ₹2.5 lacs, then you are liable to pay income tax. There are numerous ways to save taxes, the most popular being Section 80C deductions. Since this is a widely known part of the Income Tax Act, this section is usually completely utilized by everyone.
So, are there any other ways to reduce our tax liability? Indeed, there are.
Here I’ve listed down 5 other options to do so.
Section 80 CCD(1B)
This section was introduced in the budget for the year 2015, so it is relatively new. You can claim a deduction of ₹50,000 by investing in the National Pension Scheme (Tier I account). This is over and above the 80C limit of 1.5 lacs.
Section 80D
If you have paid for the medical insurance premium for yourself, your spouse, dependent children, or parents, you may claim it under this section. The limit is ₹25,000 for yourself, your family, and children and an additional ₹25,000 for parents. In case your parents are above 60, you can claim up to ₹50,000 for them. Also, if your senior citizen parents don’t have health insurance, you can claim actual medical expenses incurred up to ₹50,000 annually.
Section 80G
Any donations made to any NGOs or charitable institutions that are recognized by the IT Act can be claimed as a deduction. In most cases, only 50% of the amount donated can be claimed. 100% amount is allowed as a deduction if the donation is made to certain specified institutions. These are usually funds set up by the government like PM’s National Relief Fund, National Children’s Fund, etc. PAN of the recipient would be required to claim this as a deduction from income.
Section 80GG – An alternative to House Rent Allowance
We all know that an exemption for house rent allowance can be claimed if you are staying on rent and receiving HRA as a part of your salary. To claim this, rent receipts should be submitted to your HR. The maximum amount that can be claimed can be calculated here, HRA Calculator.
Now comes the alternative to HRA, in the form of Section 80GG. This is for those who are not receiving HRA as part of their salary, but are paying rent. Accordingly, such individuals can claim up to ₹5000 per month as a deduction.
Leave Travel Allowance
If you are receiving LTA as a part of your salary, you can claim a tax exemption for a trip made within India. Since we could not travel in the past year due to covid, the government launched LTA Cash Voucher Scheme. Under this scheme, you can claim an exemption by spending on goods or services carrying GST of 12% or higher between 12th October, 2020 to 31st March, 2021. This exemption can only be claimed by submitting the bills to your HR. You may refer to this article for more details.
To avail the benefit of the above sections, the investment/expense should be made before 31st of March. And in case of salaried employees, make sure to submit the relevant documentary proofs to your employer no later than the end of this week. The due date to file your income tax return for Financial Year 2020-21 is September 30, 2021.
We wish you a Happy Financial Year-End!
