Filing I-T Return? Claim These Deductions (Part – I) View Second Part >>
Many salaried people, professionals, and small businesses owned by individuals and small firms are now getting ready to file their ITRs for the financial year 2019-20. This year, the date for filing ITR got extended to 30/11/2020. The I-T Returns are filed by salaried people on the basis of information in Form 16 given to them by their employers. In Form 16, the employer has accounted for all the tax-saving investments and expenses that are provided to him. However, it is generally the case that most of the people miss out on something which may save their tax however of small amounts. They may miss out on claiming certain deductions or may miscompute certain tax-free incomes etc. Further, in the case of salaried ones, it is seen that employers are generally cautious in not deducting the TDS lesser than due, and hence often end up deducting TDS more than the tax due from the employee. The summary lesson from this is that Form 16 is not your I-T Return, you may even have the tax dues lesser than those computed therein.
A similar thing may also happen in the case of professionals and businesses owned by individuals in their proprietary capacity. This article analyses some of the things that are more prone to be missed from claiming in I-T Returns by many taxpayers.
Even if you miss these claims at Form 16 stage, you can still and you must make those claims in your I-T Return.
1. Home loan principal repayment deduction
If you have purchased a house and it is financed through a home loan, you repay this loan through the EMIs. Such EMI has two components, one, home loan interest, and another principal repayment. You must look into the home loan interest certificate that the bank gives you. You can download this certificate through net banking. Often, taxpayers claim the deduction on account of interest portion as a deduction from house property income however, they forget to claim the deduction on account of home loan principal.
The home loan principal amount repaid during the year can be claimed as deduction under section 80C of the Income-tax Act. In case, you have not exhausted the limit of deduction up to Rs. 150,000/- by claiming other savings and investments under this section then you can claim this amount as a deduction.
2. School Tuition Fees Deduction
You must have heard about ‘80C’ deductions. Yes? School fees are one of the components of those deductions with insurance premia, PPF, EPF, FDR, NSC, etc. The maximum limit for such aggregate investments and payments is ₹1,50,000/-. For example, your investments and payments in respect of insurance premium, EPF, PPF, etc., aggregate to ₹100,000/- and in this particular year you have paid school fees of about ₹60,000/-, you can claim ₹50,000/- from school fees as a deduction. In case, you have no other major deductions, you can claim entire school fees as a deduction from your taxable income. This deduction can also be claimed against the fees paid for pre-nursery and nursery schooling of the children. However, this benefit can be claimed on fees paid in respect of only two children.
3. Parent’s Medical Treatment Expenses
If you have parents or any of them or two of them are senior citizens (more than 60 years of age) then you can claim the deduction against the medical treatment expenses incurred on their treatment. Such medical treatment expenses must NOT be paid in cash but through banking channels like cards and net banking or cheque or DD. The amount of ₹5000/- spent on preventive health check-up can be paid in cash, though. For claiming this deduction, your parents should not be covered under any health insurance plan for which premium has been paid by you or by them or by your employer. The condition is that they should not be covered under any health insurance plan.
The maximum amount of deduction that can be claimed on parent’s medical expenses are ₹50,000/- and this includes the amount spent for a preventive health check-up.
So, it is always better to pay by card for the medical expenses and save the bills so that they reduce your taxes. Many times, we claim deduction on account of health insurance but forget to claim deduction on account of parent’s medical expenses.
4. HRA Exemption
If your employer is paying you an HRA as a part of your salary package, some amount of that HRA may be tax-free. First, check all the payslips and tally the aggregate amount from payslips and Form 16 and check whether the tax-free amount is computed properly in Form 16. The tax-free amount of HRA is LEAST of the following:
- Amount of HRA received by you
- 50% of your salary (includes basic salary + DA + Turnover commission if any) in case of metro cities and 40% of that in the case of non-metro cities
- Rent paid by you minus 10% of your salary (includes basic salary + DA + Turnover commission if any)
It is observed that in most of the cases, the third option given above applies. You can claim this exemption even if you own a house and it is rented out and you are claiming home loan interest and principal deduction against your rental income.
So, if you have not provided the rent agreement or rent receipts to your employer and he deducts your TDS more than your due tax, then at the time of filing your I-T Return, you can claim this HRA exemption and claim a refund of your excess TDS. You CANNOT claim this exemption if you are staying in your own house or with your spouse and NOT paying rent.
5. Deduction on rent paid
Suppose, you are not a salaried employee, or even if you are a salaried employee but not receiving HRA and you are paying rent for your accommodation, then you can claim deduction while filing I-T Return. This deduction is available only if you or your spouse or your minor children DO NOT own any house anywhere. The amount of deduction that can be claimed is LEAST of the following:
- Rent paid minus total income
- 25% of the adjusted total income
- ₹5,000/- per month
The ‘adjusted total income’ in this case is computed by adding incomes from all sources and then deducting income from long term capital gains, short term capital gains on listed shares, deductions under 80C, 80 D, 80 DD and all such sections starting with 80 except section 80GG (under which this deduction itself is claimed).