Saturday 9 February 2008

9 great ways to reduce tax burden

One of the most common questions by all is: what should I buy to milk the tax breaks that I am legally allowed? So here is a guide to the deductions you can use apart from the popular section 80C Rs 1-lakh deduction.

Look beyond section 80C cut your tax burden further. Remember, you will have to spend under a specific head to claim these sweet little tax breaks. Charity, education loans and medical bills; all qualify for a tax break.

1. 80C

Qualifying products: NSC, notified bank deposits and post office time deposits, EPF and PPF, ELSS, life insurance plans, deferred pension plans

Mandatory requirements: Payment has to be made before 31 March 2008

Who can avail the deduction: Individuals and HUF (both resident and non-resident)

How much: Cannot exceed Rs 1 lakh.

2. 80CCC

Qualifying products: Pension plans of life insurers

Mandatory requirements: Payment has to be made before 31 March 2008

Who can avail the deduction: Individuals

How much: Within the overall limit of Section 80C (up to Rs 1 lakh)

3. 80D

Qualifying products: Medical insurance policies taken for self, spouse, dependant parents or children, or any member of HUF

Mandatory requirements: Premium should be paid through a cheque out of income chargeable to tax

Who can avail the deduction: Individuals, HUF

How much: Up to Rs 15,000; senior citizens can claim up to Rs 20,000

4. 80DD

Qualifying products: Expenses on the medical treatment of a dependent who is a person with a disability

Mandatory requirements: Certification by a medical authority

Who can avail the deduction: Resident individual or HUF

How much: Up to Rs 50,000, or up to Rs 75,000 if the dependant is a person with severe disability

5. 80DDB

Qualifying products: Expenses on the medical treatment of a specified disease (cancer, AIDS, neurological diseases, chronic renal failure and more)

Mandatory requirements: Certificate in Form No. 10-I to be submitted along with the income tax return form. Deduction is available if the amount is actually paid for treatment

Who can avail the deduction: Resident individuals or HUF

How much: Rs 40,000 (if the person treated upon is less than 65 years of age), or Rs 60,000 (if the age of the person treated is 65 years or more)

6. 80E

Qualifying products: Payment of interest on loan taken for higher studies

Mandatory requirements: Deduction is available in the year in which repayment starts and only for eight immediately succeeding assessment years

Who can avail the deduction: Individuals

How much: Deduction available on the total interest portion of education loan, the principal repayment gets no tax advantage

7. 80G

Qualifying products: Donations to certain funds and charitable institutions

Mandatory requirements: Not applicable

Who can avail the deduction: Resident individuals or HUF

How much: 50 or 100 per cent deduction on the entire donated amount, or 50 or 100 per cent deduction subject to 10 per cent of gross total income

8. 80GG

Qualifying products: Rent paid for residential purpose

Mandatory requirements: Should not be getting house rent allowance. Actual rent paid is in excess of 10% of the total income

Who can avail the deduction: Self-employed or salaried

How much: Excess of actual rent paid over 10 per cent of GTI, or 25 per cent of GTI, or Rs 2,000 per month, whichever is the lowest

9. 80U

Qualifying products: Expenses incurred on self, if disabled

Mandatory requirements: Certification by a medical authority to be furnished along with the income tax return form

Who can avail the deduction: Resident individuals

How much: Rs 50,000 for a person with disability, Rs 75,000 for a person with severe disability (disability of over 80 per cent)