Make sure you claim these tax exemptions

It is not just investments that can help you save tax. There are various payments that everybody does throughout the year that can help you get chunky income tax exemptions. It is important to keep original receipts so that you can use them to claim exemptions. If your returns are prepared by a tax advisor, do not forget to tell them about these payments and ensure that your return reflects the same. Let us see these in detail.

Interest on bank savings - Income Tax rules give you a deduction on interest income under Section 80TTA. For any resident individual (age of 60 years or less) or those abiding by the Hindu Undivided Family, interest earned up to Rs 10,000 in a financial year is tax free. The deduction is allowed on interest income earned from a savings account with a bank, savings account with a co-operative society carrying on the business of banking or savings account with the post office.

For senior citizens, benefits are permitted under Section 80 TTB, a new section announced in Budget 2018. A maximum deduction of Rs 50,000 in respect of interest income from deposits held by senior citizens will be allowed from the total income.

Education loan - If you have taken an education loan and are repaying the same, then the interest paid on that education loan is allowed as a deduction under Section 80E. The deduction happens from your total income. Do remember the deduction is provided only for the interest part of the Equated Monthly Installment (EMI) paid in the financial year. Only individuals can claim this deduction (not available to HUF).

"The interest paid on education loan taken for higher education for oneself, spouse or children is fully tax-deductible," says Amar Pandit CFA, Founder of HappynesFactory.in. It can also be a loan for a student for whom the individual is a legal guardian. Parents also can easily claim this deduction for loan taken for higher studies of their children. The best part is that there is no limit on the maximum amount that is allowed as deduction.

Loans taken from friends or relatives don't qualify for this deduction even if the end-use was for education. Don't forget that if the education loan tenure exceeds eight years, then you cannot claim a deduction for the interest paid beyond the eight years.

Home loan - There is a deduction for interest paid on housing loan. Under Section 24, the interest portion of the EMI paid for the year can be claimed as a deduction from your total income up to a maximum of Rs 2 lakh. There is also deduction in respect of interest paid towards home loan during the pre-construction period. Also, the principal portion of the EMI paid for the year is allowed as a deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh a year. Do remember if the loan is taken jointly, then each of the borrowers can claim a deduction for home loan interest up to Rs 2 lakh each and principal repayment of up to Rs 1.5 lakh each in their individual tax returns. To claim this deduction of joint home loan, borrowers should also be co-owners of the property taken on loan.

House Rent Allowance (HRA) - Salaried individuals receive HRA from their employer. The exemption against HRA can be used if the employee is living in rented accommodation. The employee must actually pay rent to the owner. The amount of HRA exemption is the lesser of (1) HRA received from the employer, (2)actual rent paid less 10% of basic monthly salary or (3) 40% of basic salary for those staying in any place except the metros cities (people staying in the four metros can get up to 50% of basic salary as exemption).

An individual can claim tax exemption on both HRA and home loan interest. But if are paying rent in excess of Rs 1 lakh annually, you have to obtain the landlord's PAN. If you can't give the landlord's PAN, you may lose out on the HRA exemption. If the landlord does not have a PAN, you need to give a declaration of the same. What if your employer doesn't provide with HRA? Relax. You can claim exemption under Section 80GG.

Leave travel allowance (LTA) - LTA is received from the employer towards the cost of domestic travel to hometown or for vacation once in two years. This travel can be by rail or air for self and family members. LTA is mentioned in your cost to company (CTC) document/appointment letter. This deduction can only be claimed by a person from the employer directly. LTA is allowed to be claimed twice in a block of four years. Employees are also allowed to carry one unclaimed LTA to next year.

For LTA claims it is necessary to have actually travelled. You cannot claim incidental expenses such as local conveyance, sightseeing, hotel accommodation, food for exemption. The LTA exemption is also limited to the LTA provided by the employer. So, for example, if LTA granted by the employer is Rs 25,000 and actual eligible travel cost incurred by the employee is Rs 18,000, the exemption is available only up to Rs 18,000 and balance Rs 7,000 would be included in taxable salary income.

Disability and medical expenses - Under Section 80 DD, a deduction is allowed for rehabilitation of handicapped dependent relative. This deduction is available to a resident individual or a HUF. Deductions can be claimed on expenses incurred on medical treatment, training, and rehabilitation of the handicapped dependent relative. Where the disability is 40% or more but less than 80%, there is a fixed deduction of Rs 75,000. If there is severe disability (disability is 80% or above), the fixed deduction is Rs 1,25,000.

Under Section 80U, there is a deduction for a person suffering from a physical disability. The deduction is Rs 75,000 to a resident individual who suffers from physical disabilities (including blindness) or any mental retardation. In case of severe disability, the deduction amount is Rs 1.25 lakh.

There is also a 'standard deduction' of Rs 40,000. This amount of Rs 40,000 can be reduced by salaried taxpayers from their gross salary. The standard deduction of Rs 40,000 replaces medical allowance of Rs 15,000 and transport allowance of Rs 1,600 per month that is, Rs 19,200 per annum.

Donations - Payments made as donations can fetch you tax exemptions under Section 80G. The various donations specified are eligible for deduction up to either 100% or 50%. The donations above Rs 2,000 should be made in any mode other than cash to qualify as tax deduction. Some of the donations with 100% deduction from income are payments made to National Defence Fund (central government), Prime Minister's National Relief Fund, any fund set up by a state government for the medical relief to the poor, Chief Minister's Relief Fund, Swachh Bharat Kosh, Clean Ganga Fund etc. Donations with 50% deduction include payments made to Jawaharlal Nehru Memorial Fund, Prime Minister's Drought Relief Fund, Indira Gandhi Memorial Trust, etc. There are also donations eligible for 100% deduction but subject to 10% of adjusted gross total income. This list includes donation payments made to government or any approved local authority/institution for the purpose of promoting family planning.

EXPENSES THAT CAN REDUCE TAX OUTGO

• Interest component on home loan repayment up to Rs 2 lakh
   
• HRA to the extent of actual rent paid, 40% of basic salary for those in non-metros or actual rent paid minus 10% of basic monthly salary, whichever is lower
   
• LTA for travel by rail or air to a domestic location for self and family members
   
• Expenses incurred on medical treatment, training, and rehabilitation of handicapped dependent relative