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Missed utilizing all tax deductions? Claim them while filing your returns

Spent on your uninsured parents' COVID treatment or paid a processing fee for a home loan? You can claim these amounts as deductions, subject to limits

October 04, 2021 / 10:14 AM IST

Typically, employers ask employees to submit their investment declarations and proofs – on the basis of which your taxes are deducted to be deposited with the income tax department every month – by January or February. Yet, many delay the process and end up under-utilising the tax relief. In some cases, the lack of awareness is the culprit.

Earlier, we highlighted the importance of not pushing tax return filing to the last minute. Besides avoiding procedural glitches, devoting adequate time to complete the process will ensure that you get to exhaust all tax benefits – even the ones that did not form part of your Form-16. For example, deductions under section 80G on donations made – employers usually do not ask for these details and hence, the deduction has to be claimed at the time of filing returns.

The extended due date for filing tax returns for this  assessment year 2021-22 is December 31. Ensure that you utilise these benefits at the time of filing your returns, and claim a refund of the excess tax deducted by your employer.

Uninsured parents’ medical expenses

The COVID-19 pandemic wreaked havoc across the world, causing physical, emotional and financial distress. Many uninsured individuals were hit hard due to the enormous hospitalisation bills. If you had to pay for your parents’ COVID-19 or any other treatment procedure, you can claim a deduction of up to Rs 50,000 under section 80D. “Parents should be aged over 60 years and not be covered under any medical insurance policy. Medical expenses include consultation fees, medicines and so on,” says Vaibhav Sankla, Principal, BillionBase Camp Family Office.

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This is relatively less-known compared to deductions on health insurance premiums paid. Now, many incurred COVID-19 treatment expenses in March 2021. “That is, well after the timeline for investment declaration submission was over, as most employers set a deadline of December or January for the purpose. So even those aware of this tax benefit may have missed availing of this tax break,” says Sudhir Kaushik, Co-founder, Taxspanner.com.

The cost of any preventive medical check-ups – up to Rs 5,000 – can also be claimed under section 80D. “But deduction for hospitalisation expenses cannot be claimed if the payment has been made in cash. For preventive healthcare check-ups, however, cash mode is accepted,” says Kaushik.  

Processing charges on home loans

Many home-buyers bought houses last year, thanks to lower prices, benign interest rates and concessional stamp duty offers across states. Now, all borrowers can make use of the section 24 deduction of up to Rs 2 lakh on housing loan interest paid. But you can get more out of this section if your interest amount is not enough to exhaust the limit. If you have taken a home loan and have paid processing fees, for instance, the expense can qualify as a deduction. “Many existing borrowers switched to lower rates offered by their housing finance companies by paying the conversion charges. These fees are also eligible for deduction,” says Sankla. For example, HDFC charges 0.5 percent of the outstanding loan amount or a maximum of Rs 50,000 to reduce the interest rate applicable to existing borrowers.

Deduction on savings account interest

While tax-payers keep track of interest earned on their fixed deposits, they tend to ignore interest earned on their savings account deposits. It is a mistake best avoided as you have to declare it under income from other sources in your income tax return form. Moreover, it can also fetch you tax breaks. “Your gross total income includes interest from a saving account with a bank or a co-operative society or a post office. Such individuals are eligible for deduction of such interest income up to Rs 10,000,” says Sankla. If your senior citizen parents earn interest through savings accounts or fixed deposits, they are entitled to higher deduction of up to Rs 50,000 under section 80TTB.

Reinvestment of NSC interest

Though they have now dwindled in popularity, many risk-averse investors continue to remain invested in National Savings Certificates (NSC). The interest earned on NSC is taxable. “However, the reinvestment of interest every year is eligible for deduction under section 80C,” says Kaushik. So, if you have not been able to exhaust your 80C limit of Rs 1.5 lakh, this can come in handy to maximise the tax break.

Tax exemption on HRA

Salaried employees tend to be well aware of tax exemption on house rent allowance, which is a key component of their salary. However, in case you switch jobs during a financial year, you need to make additional effort to ensure you get the entire benefit. “For example, let’s suppose you join another organisation in October. Now, your previous employer cannot give you the exemption, as submitting investment proofs is usually in December. And your current employer cannot extend the exemption benefit to HRA provided by the previous employer. So, in such cases, you have to calculate the right exemption amount and claim it in your income tax return,” says Kaushik.

Also read: Paying a home loan EMI or staying on rent? Know the tax benefits

Finally, if you are a salaried employee, do not forget to ascertain whether you would be better off with the new tax regime. “Salaried employees can change their choice even at the time of filing returns. Ensure that you calculate tax payable as per both regimes before completing the process,” says Kaushik.
Preeti Kulkarni is a financial journalist with over 13 years of experience. Based in Mumbai, she covers the personal finance beat for Moneycontrol. She focusses primarily on insurance, banking, taxation and financial planning
first published: Oct 4, 2021 09:39 am

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