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Expenses that can save your Taxes!!

Updated on: 07 Aug, 2023 03:21 PM

Did you know that expenses incurred by you can help save your taxes?

No, not only investments; even your personal expenses incurred by you in respect of certain activities can help you reduce your tax liability.Now, change the way you look at your expenses as they can have a huge impact on your tax savings.

Curious to know the expenses that can reduce your tax burden? Here are some of the popular expenses:

  • Home Loan Installments Have you taken a loan for purchase or construction of a house property and paying interest and principal amount on such loan? Well, you can claim the deduction of up to Rs. 2,00,000 on payment of interest and deduction of up to Rs. 1,50,000 on repayment of principal amount.
  • Donations Donation is done as a token of humanity and Income Tax is generous enough to make you feel proud about it as it offers deduction on the donations made by you to any fund or charitable institutions are governed by Sec 80G while all your money gifted for the purpose of scientific research or development and rural well-being come under the ambit of Sec 80GGA.
  • Children tuition fees Education is the right of every individual and this exemption of income tax help the persons to protect the right to education. So if you are paying school/ college/ institution fees of children, an exemption up to Rs. 1,50,000 under 80C (overall exemption granted under 80C is 1,50,000) can be availed. But ensure that you are claiming the exemption only of tuition fees paid to recognized schools/ college/ institutions as other fees like conveyance fees, computer fees, sports fee etc. are not allowed to be claimed.
  • Medical Insurance Want to insure yourself, your parents or your spouse and children so that the money can be utilized at the time of ill-health? Premium paid on such insurance shall be admissible for deduction up to Rs. 15,000 for individual (less than 60 years of age) covering his family and dependent children. If you want to cover your parents too in the insurance policy, you shall be eligible for the deduction of another Rs. 15,000. In case age of either of parents is 60 years or more, the deduction is available up to Rs. 20,000.In the latest Budget 2015, the limit has been increased to Rs. 25,000 and 30,000 respectively.
  • Higher Education loan Have you taken a loan to become a MBA professional, doctor, engineer or for any other higher education and now repaying it? You can claim the deduction of interest paid on such loan. Interest paid can be claimed till 8 years. It is important to note that even if you have taken a loan for your spouse or children, you can still avail the deduction. Education loan must be taken from a bank or a financial institution.
  • Life Insurance Premium Life of a person is the most valuable of all; so it should be insured on a priority basis. And when you pay the premium to insure life and then you get an exemption of such payment to reduce your tax burden, it becomes, even, more valuable. Yes, the premium paid for life insurance can be claimed as deduction in section 80C of the act (maximum deduction allowed under section 80 is up to Rs. 1,50,000).
  • House Rent Leaving in a rented house? Still not claiming House Rent Allowance (H.R.A.)? Don't worry, Income tax brings benefit for you too. You may claim the exemption of rent paid partially or fully but such exemption cannot be availed if you or your family owns any residential accommodation in India or abroad.
  • The Cost of transfer of capital asset & cost of improvement: Incurred some cost while transferring the asset or incurred some cost on improvement of asset? Don't worry, while calculating capital gain on transfer of asset, cost of transfer and cost of the improvement shall be deducted to calculate the capital gains.

So from now on, don't worry about the ever increasing expenses of yours and your family because if you are spending on the right expenses, from different perspective, you are saving your taxes.

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CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.