The Economic Times daily newspaper is available online now.

    7 lesser-known investments, expenditures eligible for tax breaks

    Synopsis

    Did you know you that can claim tax deduction on stamp duty? Here are other tricks that can help you cut tax.

    cocsThinkStock Photos
    Deduction allowed on home loan interest paid is not restricted to loans from banks and housing finance companies.
    ET Wealth decodes some of the lesser-known investments and expenditures that are eligible for tax breaks.

    1. Deduction for pre-nursery
    Claim relief on children’s playgroup, pre-nursery and nursery fees
    Introduced in 2015, this is not as widely known as the deduction on the school tuition fees.
    Section: 80C
    Maximum permissible deduction: Rs 1.5 lakh
    What to watch out for: Benefits restricted to two children.

    2. Re-invest Public Provident Fund (PPF) to save tax
    Tap PPF account for this year’s tax-saving investments

    The PPF scheme allows partial withdrawals from the seventh financial year.
    Section: 80C
    Extent of withdrawal permitted: Loan facility is available from the fourth year and withdrawal facility is available from 7th year under the PPF scheme.
    What to watch out for: As only one partial withdrawal is allowed per financial year, kicking off the tax-planning exercise and estimating the amount needed early will help you.

    3. Stamp duty also cuts tax
    Claim deduction on stamp duty and registration fees paid while buying a house
    This benefit can come in handy particularly for those who have taken a home loan towards the financial year-end as the principal component is lower in the initial years.
    Section: 80C
    Maximum permissible deduction: Rs 1.5 lakh
    What to watch out for: Ensure that you claim the deduction in the financial year of purchase as it cannot be availed later.

    4. Pay interest to parents
    Pay interest on loan taken from parents to finance house purchase

    Deduction allowed on home loan interest paid is not restricted to loans from banks and housing finance companies; this can be particularly useful if parents fall in lower tax brackets.
    Section: 24B
    Maximum permissible deduction: Rs 2 lakh
    What to watch out for: Ensure that you pay interest on loans from parents and don’t forget to collect a certificate attesting the interest payment.

    5. Rent to parents cuts tax
    Pay rent to your parents and document it if you are living in a house owned by them

    You can avail of house rent allowance (HRA) exemption, while your parents will be eligible for standard deduction and deduction on municipal taxes paid, resulting in savings for the entire family.
    Section: 10(13A)
    Maximum permissible deduction: Actual HRA received or excess of rent paid over 10% of salary or 50% of the basic salary (40% if you live in a nonmetro), whichever is lower.
    What to watch out for: Make the landlord-tenant equation official. Get a lawyer to draw up a rent agreement containing details of rent payable and submit rent receipts to avoid rejection of the exemption later.

    6. Tax break for group cover
    Utilise tax break on group health insurance premium paid by you

    If you are paying premiums on a group health cover purchased through your employer for yourself, spouse, children and parents, you are entitled to deductions just like independent, retail health covers.
    Section: 80D
    Maximum permissible deduction: Rs 75,000*
    (*Total cap on tax benefits, assuming the tax-payer’s age is less than 60 years and parents are senior citizens)
    What to watch out for: If your employer has funded the entire premium, you cannot stake a claim on the tax benefits.

    7. Parents’ treatment eligible
    Fund your parents’ medical expenses

    It is common for elderly parents (aged 60 and above) to incur recurring expenditure on medicines; if you finance these expenses, you will be allowed tax breaks akin to health insurance premiums.
    Section: 80D
    Maximum permissible deduction: Rs 50,000
    What to watch out for: This expense will not be allowed as a tax break if they are covered by a health insurance policy.

    Source: H&R Block, TASS Advisors and Chartered Club
    ( Originally published on Dec 17, 2018 )

    (Your legal guide on estate planning, inheritance, will and more.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    ...more

    (Your legal guide on estate planning, inheritance, will and more.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    ...more
    The Economic Times

    Stories you might be interested in