The maximum limit under Section 80C of the Income Tax Act is Rs 1.5 lakh. Most of the times, the salaried exhaust this limit as it includes the employee provident fund and insurance premium. If you are yet to exhaust the limit, read this article – Tax Deductions You Can Avail Under Section 80C.
If you have already exhausted the limit under Section 80C, there are many other ways that you can save taxes under other sections. There are, of course, the home loan tax benefits. Here, we can get tax benefits of up to Rs 4 lakh. Read this article for more information – What Are Various Income Tax Benefits On Housing?
In this article, we will be talking about those tax benefits that generally people don’t use but can come in handy, especially if you have an income of over Rs 10 lakh per year.
Contribute to political parties
If you have made any donations to an electoral trust or any political party registered under Section 29A of the Representation of People Act, 1951, you can get a tax deduction on the same. You can claim these deductions under Section 80GGC. The payments cannot be made in cash or kind. You have to contribute through cheque or net banking.
Any individual tax payer can contribute up to 10% of their annual gross earnings and get tax deductions. Note that only those who have no alternative source of income such as a business entity can claim these tax deductions. Ensure that the political party is legitimate before you contribute to their cause.
Donate for a social cause
Love giving to the charity? You can save taxes on the money that you donate. Whole or part of your donations can be claimed as a tax deduction under Section 80G. Only by contributing to some charities, you can get 100% of the donation as tax deduction. For example, only donations made to the National Defence Fund, The National Foundation for Communal Harmony or Prime Minister’s National Relief Fund qualify for 100% deductions with no limit. However, donations made to charities such as the Prime Minister’s Drought Relief Fund will get you only 50% tax deduction.
Start a Hindu Undivided Family (HUF)
Resident individuals in India can start a Hindu Undivided Family (HUF). A HUF is an independent financial entity that can be formed by a Hindu family. Buddhists, Jains, and Sikhs can also form a HUF.
HUFs have their own PAN and bank account. It is usually headed by the senior-most member of the family called the ‘Karta’. A HUF’s income is taxed separately. This will not be clubbed with the individual incomes of the HUF members. For example, suppose you and your spouse earn a salary of Rs 14 lakh each and you also earn Rs 4 lakh as rent from your ancestral property. Since you both fall under the 30% tax bracket, you will have to pay 30% tax on the rent. However, if you are a member of a HUF and the rent is claimed by the HUF, it will be taxed at only 10%. Any gift given by members to HUF is not taxable.
Transfer money to dependents
If you get money from your spouse, it is tax-free. However, if this money is invested, the income will be taxable. However, if such income is invested, it will be taxed in the hands of your spouse. If your spouse doesn’t earn any other income, this will be tax-free. Suppose you transfer Rs 1,00,000 to your spouse and they invest it and get Rs 14,000. The transfer is tax-free but this income of Rs 14,000 will be clubbed with your income and will be taxed. However, in the following year, if this Rs 14,000 is invested and you get Rs 4,000 from it, your spouse will pay the tax. If your spouse has no other income, this income will be tax-free.
Senior citizens have higher exemption limits and you can use this to your advantage. You can transfer money to your parents and ask them to invest in special schemes such as the Senior Citizens’ Savings Scheme (SCSS) that earn higher returns. You can save taxes on collective investments too.
Claim HRA Deductions
You can claim House Rent Allowance (HRA) and save money even if you stay in a house owned by your parents. You can pay rent to them and claim deductions.
Want to invest in Mutual Funds to save tax? Read this article – Five ELSS Or Tax Saving Funds To Invest In 2018.