Common Tax Deductions You Might Be Missing Out On

Paying income tax can feel like a hassle, especially when you’re trying to organize receipts and find ways to reduce your tax liability. However, with proper planning, you can take advantage of lesser-known tax deductions to maximize your savings. Here are seven tax-saving tips you might not know about:

• Contribute More to the National Pension Scheme (NPS): If you’re enrolled in the National Pension Scheme (NPS), you can claim a tax deduction under Section 80CCD(1) of the Income Tax Act, up to a total of ₹1.5 lakh under Section 80CCE. But here’s a bonus: you can claim an extra deduction of ₹50,000 under Section 80CCD(1B) by contributing more to NPS. So, increase your contribution to enjoy additional tax savings!
• Tuition Fee Deductions for Your Children: Parents can claim a deduction for the tuition fees paid for up to two children in a school, college, or any recognized educational institution. This deduction, which falls under Section 80C, can be claimed along with other eligible investments, up to ₹1.5 lakh per financial year. Don’t forget to include this when filing your returns!
• Wedding Gifts are Tax-Free: Weddings in India come with lots of gifts! Here’s the good news: gifts (cash, cheque, or kind) received on your wedding day are tax-exempt under Section 56(2). Whether it’s from friends or relatives, you don’t have to pay taxes on these gifts, making your special day even more beneficial.
• Re-route Investments Through Your Parents: If your parents are senior citizens with a lower income, you can transfer your investment earnings to them to enjoy lower tax rates. Interest income can be gifted to them tax-free, and they can reinvest it in senior citizen schemes like Fixed Deposits (FDs) or the Senior Citizens’ Savings Scheme. This way, you benefit from the lower tax bracket applicable to senior citizens.
• Claim Deductions for Donations: Donations to charitable organizations can provide tax benefits too. Depending on the charity and purpose, you can claim either a 100% or 50% deduction. Just remember, donations over ₹2,000 must be made by cheque or digitally to be eligible for tax deductions.
• Telephone and Internet Expenses: If your job requires the use of a telephone, mobile, or internet, the expenses reimbursed by your employer are tax-exempt under Rule 3(7)(ix). Keep your bills handy, and you won’t have to pay taxes on the reimbursement amount!
• Health Insurance and Medical Expenses for Parents: Section 80D allows you to claim a deduction of up to ₹25,000 for paying the health insurance premiums for yourself, spouse, and children. But there’s more: you can also claim an additional ₹50,000 if you’re paying health insurance premiums or medical expenses for your senior citizen parents. Even if your parents aren’t insured, you can still claim up to ₹50,000 for their medical expenses during the year.