The most popular 80C deductions taken for tax rebate have a limit of Rs.1.5 lakh. Still, you may have to pay tax if your taxable income exceeds the basic exemption limit. However, there are many other investment options and expenditures that are eligible for a tax rebate. Before the current financial year ends, let us know about the five other tax avoidance options:
- Mediclaim Insurance (Section 80D): The insurance premium paid for self, spouse, children and parents are allowed for a tax deduction. The expenditure is deductible up to Rs.25,000 for self, spouse and children. However, a separate Rs.25,000 deduction is available for parents below the age of 60 and Rs.50,000 for parents above the age of 60. One can claim the payment only if it is done by other than cash mode.
- Rent Paid (80GG): The self-employed or the person receiving salary without HRA can claim a tax rebate on rent paid on house property. One can claim such deduction after declaring in From 10BA through the e-filing portal. However, the assessee, spouse, minor child or HUF must not own any house at the place of his duty.
- Education Loan Interest (80E): You can claim a deduction for interest paid on self, spouse, or children’s education loan. You can claim a tax rebate up to eight years from the date when the education loan started. The deduction is applicable only on the interest amount and not the principal amount without any limit.
- National Pension Scheme or NPS (80CCD(1B)): Investment in NPS is allowed as an 80C deduction with a limit of Rs. 1.5 lakh. However, an additional tax rebate of up to Rs. 50,000 is allowed for investment in NPS Tier 1 accounts. The deduction is above the limit of 1.5 lakh prescribed under 80C.
- Donation (80G): One can claim deduction on contributions made to prescribed funds. The limit of deduction is based on the category of funds. As per the act’s provisions, various specified donations are eligible for either 50% or 100% of deduction. Donations made in kind are not allowed for a tax deduction. It can be in any other mode like cash, cheque or draft. However, Cash donations of more than Rs. 2000 are not allowed.
There are only a few days left for the financial year to end. One may invest some amount in NPS or Mediclaim to claim additional exemptions. Repayment of any unpaid interest on an education loan can give additional tax benefits. One can consider the above expenditures or investments for computation of taxable income and pay advance tax for FY21 accordingly.
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