Use these expenses to save on tax outgo

You can get tax deductions on certain expenses that you incur for your personal needs

Did you know that investments are not the only way to reduce you tax outgo in an assessment year? You can reduce your tax outgo through non-investment options as well. Simply put, you get a tax deduction on some expenses that you incur for your personal needs. Here’s a look at some.

Health insurance: You can claim deduction of up to 15,000 on the premium that you pay for your health insurance policy. “Health insurance premium paid for health cover including preventive health check-up for self, spouse and dependant children can be claimed as deduction up to 15,000 per financial year under section 80D of the Income-tax Act, 1961. An additional deduction of 5,000 can be claimed if any of them qualifies as senior citizen," said Parizad Sirwalla, partner (tax), KPMG. Hence, for senior citizens, the claim amount is 20,000.

And if you pay the premium for your parents, you can claim an additional deduction of 15,000. If your parents are senior citizens and you are paying for the insurance premium, the amount goes up to 20,000. Remember that the amount that you pay as premium should not be in cash. Furthermore, the deduction for payment of health insurance premium is only available if you pay for yourself, spouse, dependant children and parents; it is not available for the payment of premium for your siblings.

Preventive health check-up: When it comes to health, apart from the deduction on health insurance premium, you can reduce your tax outgo if you do a health check-up. If you do a preventive health check-up, you can claim deduction of up to 5,000. Remember that the deduction for preventive health check-up comes under section 80D and is deductible within the health insurance premium limit. However, unlike health insurance premium, payment in cash for preventive health check-up will be considered.

What all can be considered as preventive health check-up? According to Rakesh Nangia, founder and managing partner of Nangia & Co., even attested blood test reports along with the pathology laboratory’s bill qualify as a process under preventive health check-up, and can, thus, be used to avail deduction under section 80D.

Medical treatment: The I-T Act allows you to claim a deduction under section 80DD for an expense made towards medical treatment including nursing, training and rehabilitation of a dependant relative with a disability. You can also claim a deduction if you pay or deposit money under any approved scheme of certain organizations for taking care of such dependent relatives. The deduction is available if you pay for your spouse, children, parents and siblings who are wholly or mainly dependent on you. Under section 80DD, a fixed deduction of 50,000 is available. However, you can claim 1 lakh if the dependent is suffering from severe disability.

For claiming this deduction, you will have to submit a certificate issued by the medical authority to the income-tax assessing officer in case she wants to examine.

Higher education loan: If you have taken a loan for your higher education and are repaying it, you can claim deduction on the interest paid on it under section 80E. Remember that you can claim deduction for the entire interest paid for the first eight years or until the interest is fully paid, whichever comes earlier. If you took the loan not for yourself but spouse or children, you can still avail the tax deduction benefit on the interest amount.

But what you must remember is that the educational loan must be taken from a bank or financial institution or an approved charitable institution.

“You should always produce evidence when you are making a claim. Hence, a certificate of the interest payment for education loan will be useful," said Rajesh Srinivasan, partner, Deloitte Haskin and Sells LLP.

Children’s tuition fee: You can claim deduction for the tuition fee that you pay for two children under section 80C. “Tuition fees paid for full-time education in any university, college, school or other educational institution located in India, for any two children are eligible for deduction under section 80C up to 1.5 lakh per financial year. It is pertinent to note that tuition fees should not include payment towards any development fees or donation or payment of similar nature," said Sirwalla.

Tuition fees paid for pre-nursery, play school and nursery is also included. The other advantage of this is that since the I-T Act doesn’t state that both husband and wife together have to claim this benefit, if you have a large family, you can claim deduction for two of your children, and your spouse can claim deduction for the third or fourth child, or both. You must, however, remember that deduction is not available for fees paid for private tuition or coaching classes.

Donations: If you are a salaried individual who has made a donation during this assessment year, you get a tax benefit on the donation up to a limit under section 80G. For instance, you can get 100% or 50% deduction on the amount donated to certain entities.

Under section 80GGA, you can get a maximum deduction equivalent to the amount donated to entities involved in scientific research, and under section 80GGC for money given to political parties. In some cases if the donation exceeds 10% of the gross salary, no deduction is allowed on the excess amount. “It is important to look at the overall restrictions in claim deductions. Also check whether the organization or person you are donating money to has approval for 80G as validity of deduction is critical," said Srinivasan.

One more piece of advice: do make sure that you have all the documents—receipts, medical certificates, 80G validity, and others—to prove that you indeed paid for the expenses that you are claiming deductions for.