Its Tax Saving Time: Claim lesser known Deductions

Have you invested money under Section 80 CCG and saved more tax? This is the latest addition to the bouquet of tax saving products which is eligible for tax exemption effective this financial year. If you are earning an annual income of up to Rs 10 lakh and you are a "new retail investor",you have further scope to reduce tax by Rs 2500 to Rs 5000 by investing in the Rajiv Gandhi Equity Savings Scheme (RGESS) under this Section.

RGESS was launched at the union budget 2012-13. Under this scheme, you can avail a one-time tax deduction of 50% of the investment amount subject to certain conditions. Firstly, your annual income should be equal or lesser than Rs 10 lakh. Secondly you should a new retail investor. To qualify as a new retail investor, you should have opened a demat account on or after November 23, 2012. If your demat account was opened earlier, you should not have invested in stocks until the purchase of RGESS. This tax saving is over and above the Rs 1 lakh limit under Section 80 C. The maximum investment amount is capped at Rs 50,000.  If you fall in the 10% tax bracket (annual income of Rs 2 lakh to Rs 5 lakh) you can save up to Rs 2,500 on investing Rs 50,000. If you fall in the tax bracket of 20%, (Rs 5 lakh-10 lakh), the tax saving will be Rs 5,000. You can invest in stocks and securities, which are RGESS compliant, or in RGESS mutual fund schemes launched by various asset management companies (AMCs). It is better to opt for a RGESS mutual fund than buying a single stock from a risk perspective. If something goes wrong with an individual stock investor may lose some part of capital.  In case of a mutual fund, a fund manager chooses a variety of stock/securities on behalf of the investor after adequate research and analysis. Hence the risk gets diversified.

Gain from your health
The medical bills and healthcare expenses have gone through the roof. The health inflation which is hovering around 15%, is increasing faster than the headline inflation. However, you can combat the impact of the rising healthcare costs by buying a health insurance policy. You can claim a tax deduction of up to Rs 15,000 under Section 80 D. This tax benefit is available even if you cover your family members such as spouse, children and parents under the health policy. In fact, if either of your parents are 60 years and above,the tax deduction increases to Rs 20,000. If the premium amount is lower than Rs 15,000/Rs 20,000, you can use the balance  for a preventive health check up, which enjoys a tax deduction of Rs 5,000. If  you undergo a health check-up with any hospital or even a pathology lab, submit a photocopy of the bill along with other tax investment receipts to the employer. However, this tax deduction is available within the overall cap of Rs 15,000/20,000.  If you are already claiming full tax deduction under section 80D then you cannot claim additional tax benefit.
Similarly, if you or your family member incur an expenditure on treatment of specified disease such as AIDS, cancer, neurological diseases, etc, you can claim a tax deduction of up to Rs 40,000 or the actual expense whichever is lower. The limit is higher at Rs 60,000 in case of a senior citizen. The tax payer has to obtain a certificate from the doctor to claim the tax deduction. Also, if you have incurred expenditure for medical treatment of a disabled dependant, you can seek a tax deduction of up to Rs 50,000.
Lastly most companies offer a medical allowance of up to Rs 15,000 as a part of your salary, which is not taxable if you submit medical bills of that amount. You can submit medical bills and seek this allowance on a monthly/annual basis.


Cash in on your house
Most of us know that housing loan gives us a tax deduction of Rs 1.5 lakh per annum on interest repayments. Now, as per the Union Budget 2014 proposal, housing loan amount up to Rs 25 lakh can seek an additional tax deduction of Rs 1 lakh per annum.
However, the current tax deduction of Rs 1 5 lakh can double (to Rs 3 lakh per annum) if you have taken a joint housing loan with your spouse or parent subject to certain conditions. This is definitely not a bad considering that real estate prices are soaring throughout the country. Firstly you have to ensure that both of you are the co-owners of the property. Then the couple should ascertain their share of the loan. For example, if their share of the loan is in the ratio of 60:40 or 70:30, the tax benefits would be shared in that proportion. Ideally an individual in the higher tax bracket should opt for a higher ratio of the loan to save on more taxes. The repayment of principal component qualifies for tax deduction under the Rs 1 lakh limit of Section 80 C. Similarly, you can seek tax benefits up to Rs 1.5 lakh only on the interest repayments of second housing loan. However, the rental value of the second house will get added to your taxable income even if the house is lying vacant.
Similarly, not may of you know that any interest paid on home loan for reconstruction or repair of the self occupied "house property" qualifies for deduction of up to 30,000. This is subjected to the overall limit of Rs1,50,000.

Give charity and save taxes  
It pays to grow a heart. You can donate money by cash or cheque to any of pre-approved charitable institution and claim tax deduction of 50% or 100% under Section 80 G. Donations to certain charitable institutions such as Prime Minister's Relief Fund or National Defence Fund enjoy 100% deduction.

Ensure you claim every single deduction you are eligible and save maximum taxes. If you have already submitted your investment declaration with the employer, you still have not missed the bus. You can make these additional investments now and claim a refund.