Despite multiple reminders from employers, many tend to delay submitting proofs of tax-saver investments, resulting in higher tax deduction from their salary during January, February and March.
Some get overlooked due to inadequate awareness of the range of tax reliefs available. “While it is important to declare all tax saving investments at the time of TDS computation, you can even claim tax breaks that you might have missed out, by providing details at the time of your IT Return Filing. We have seen tax-payers typically forgetting to avail of several income tax deductions under sections 80C, 80D and 80E. They generally remember home loan repayment, but tend to overlook children’s tuition fees paid until March 31,” says Daphne Anand, Chief Technology Officer, Indiafilings.com, a business and tax compliance start-up.
Due to the COVID-19-induced lockdown that created obstacles for those looking to complete the tax-saving process by March 31, the deadline was extended to June 30 and subsequently, to July 31. So, if you have made tax-saving investments (section 80C) or paid health insurance premiums (section 80D) between April and July 2020, you can furnish the details in your tax return.
These apart, there are some deductions that usually do not form part of investment declarations; for example, donations made under section 80G.
In such cases, you can take the tax benefits at the time of filing your returns. You can claim refund of excess tax deducted by your employer. Take a look at the some of the lesser-known, and hence overlooked, ones that you must claim before November 30 – the extended due date for filing returns for the financial year 2019-20. You will have to specify the investments that ought to be considered for financial year 2019-20 in the new tax return forms.
Donations under section 80G
Donations made to certain trusts or charities get you a tax deduction under Section 80G. Typically, you claim this deduction at the time of filing returns; most employers do not take your donations into account in investment declaration forms. “Considering the COVID-19 situation, many individuals have generously donated to NGOs or to the PM CARES Fund. All such donations made up to July 31, 2020 would be eligible for Section 80G deduction for the financial year 2019-20,” says chartered accountant Ameya Kunte, Founder, Globeview Advisors.
Tax relief on rent paid
Now, if your salary includes house rent allowance as a component, it is eligible for exemption under section 10(13A). If you failed to avail of this exemption while filing your investment declaration, you can remedy the situation in your tax returns.
But it’s not just employees who can get this exemption – even non-salaried individuals staying in a rented accommodation can avail of tax benefits under section 80GG on rent paid. “It provides that the quantum of deduction would be the least of the actual rent paid in excess of 10 per cent of total income, Rs 5,000 per month or 25 per cent of total income. You will need to file a prescribed form 10BA along with the tax return,” says Kunte.
Savings bank interest
The interest that your savings bank account balance earns every quarter is likely to escape your attention, but it is considered as part of your total income. You can, however, avail of deduction of up to Rs 10,000 under section 80TTA. If your investment declaration does not find a mention of this tax break, do not let go of the chance to utilise it while filing returns. If you are a senior citizen, your tax benefits – on savings, bank or post office fixed deposit interest – under section 80TTB can go up to Rs 50,000.
Preventive health check-ups
While tax-payers are generally aware of deduction under section 80D on health insurance premiums paid, another tax benefit under the section is relatively underutilised. “Many individuals undergo routine, preventive health check-ups every year, but fail to retain the bills issued by diagnostic centres,” Daphne. The section allows deduction of up to Rs 5,000, subject to overall 80D limits, on preventive health tests you may have undergone during 2019-20.
Leave travel allowance
Leave Travel Allowance also gives us income tax benefits. This allowance is a common component in individuals’ salaries, but you are not eligible for exemptions every year. Moreover, you have to grapple with restrictions. It can be claimed twice in a block of four calendar years, with the current block extending from 2018-2021. Also, the exemption applies only for travel within the country with your immediate family (dependent parents and siblings, spouse and dependent children). So, your international holiday expenses will not count. The amount of tax relief will be limited to your travel bills alone, and not accommodation or refreshment expenses.
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"Since claiming LTA is not an annual affair, again, some tend to forget when they had claimed it last. Even if it does not reflect in your investment declaration, you can mention it in your tax return,” says Daphne. Ensure that you carefully preserve your flight tickets, boarding passes, train tickets or fuel bills if you have travelled by road.
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Losses booked on asset sale
If you have sold your mutual fund units, equity shares or real estate assets during the year at a loss, it can act as deduction from your total income. That is, they can be set off against any capital gains made on other transactions. Gains or losses from sale of such assets are categorised as short-term and long-term. Long-term capital losses can be adjusted only against long-term capital gains, while short-term capital losses can be set off against both short-term and long-term capital gains.
Also read: Couldn’t invest house sale proceeds to avoid capital gains tax? Here’s what you must do
Store the documents for future use
You can enter the details in income tax return forms to claim the tax benefits. Although the I-T department does not require you attach any proofs in your ITR forms, you need to ensure that you preserve the proofs such as school fee, house rent and medical check-up receipts. If you are found to have furnished false information, you will have to face repercussions.
The I-T department has the powers to go back for up to seven years and pull out files for scrutiny,” says Daphne. Safeguarding the receipts will come to your rescue if you do receive a notice later. This is also applicable to certain reimbursements made by your employer – for example, for conveyance, fuel or internet usage expenses. “These are non-taxable components of your salary, so your employer will not withhold TDS. However, you must maintain the relevant bills to avoid issues in future,” she adds.