Tax deductions you are not taking

In this article we would discuss some of the tax deduction that the common man does not know about, however they can be used as an effective tool to curb the tax payable significantly. 

Set off your Long Term Capital Gains with Long/Short Term Capital Losses

While most of us know that we need to pay taxes on short term or long term capital gains, not many are aware of the fact that capital losses, if any, can be balanced off against gains. So, for instance, if you have made a long-term capital gain of Rs 10 lakh by selling off your capital assets and long-term capital loss of Rs 3 lakh by selling stocks which are either not listed or are sold off market  , the total taxable amount would Rs 12 lakh. Please note Capital Gain on Sale of Shares sold through Stock Exchange cannot be set off against other capital losses as profit from sale of shares of listed companies through stock exchange in exempt. It is important to note that short term losses can be balanced off against both short term as well as long term capital gains. However, long term capital losses can only be balanced off against long term capital gains.

Standard Deduction on Income from House Property

If you let out your house, the rent is added to your income and taxed at the normal rate applicable to you. However, there is a 30 per cent standard deduction from this income. So, if you receive a rent of Rs 10,000 per month, the total rent for the year would be Rs 1.2 lakh. Of this, Rs 36,000 would be the standard deduction and you will have to pay tax only on Rs 84,000. Click here to know more about efficient tax deductions for House property.

Payment of Rent to your Parents

Rent payment to your parents: If you stay in a property which is registered in your parents’ name, don’t think you will miss out on HRA benefit. You can still claim HRA benefit by paying rent to your parents. However, your parents will be taxed for the rental income they earn. Thus, this is most beneficial if your parents are in the lower income tax bracket. Also, in this case, it is advisable to make an agreement with your parents, get this agreement registered and keep a record of the cheque payments you make to your parents towards rent.

Dependent suffering from Diseases

If you have a dependent, who suffers from any of the diseases specified under Section 80DDB, you can claim a deduction of Rs 40,000. The deduction is higher at Rs 60,000 if the patient is a senior citizen. The diseases include, neurological ones (dementia, dystonia, motor neuron disease, ataxia, chorea, hemiballismus, aphasia and Parkinson’s disease), malignant cancers, full-blown AIDS, chronic kidney failure and haematological disorders (hemophilia and thalassemia). Dependents can include spouse, children, parents and siblings. However, the patient should be wholly or mainly dependent on the taxpayer and should not have separately claimed any sum from an insurance company for the illness. Similarly, if a taxpayer suffers from a disability, he can claim deduction of Rs 75,000 under Section 80U. If he has a disabled dependent, he can claim the deduction under Section 80DD.

Salary Structure

Some employees are given the option to choose their salary components. A substantial amount of tax can be saved by opting for tax-friendly components like food coupons, HRA (if you are staying in a rented accommodation), medical expenses reimbursement, transport allowance and Leave Travel Allowance. Talk to your employer today! Click here to know more such deduction for salaried individuals _____________________________________________________________________________________________ Feel free to write to us,at [info@taxmantra.com] or call us at +91 88208208 11.