Tax Planning: Eleventh-hour miracle to save your income tax

There are several notified charities and relief funds through which a deduction of 100 percent can be claimed.

March 30, 2021 / 02:40 PM IST
These are some unusual gems that could be your eleventh hour miracle. [Shutterstock]

These are some unusual gems that could be your eleventh hour miracle. [Shutterstock]


After talking about tax saving through various modes of investment, medical bills and loans in part 1 to 3, we still haven't exhausted the last-minute tax planning tips to reduce the income tax payout.

These are some unusual gems that could be your eleventh-hour miracle. Here are some of those uncommon deductions:

Rent

If you are self-employed or don't receive the HRA benefit as part of your salary and live in a rented house, then this deduction will help you reduce your tax liability. Under section 80GG of the Income Tax Act, the amount of deduction from the gross total income will be the amount of rent paid but shall be restricted to the lower of the following:

  • Rs 5,000 per month.

  • 25 percent of total income before this deduction.

  • Actual rent is less than 10 percent of income.

However, if a residential house is owned by the individual, spouse or minor children then he/she shall not be allowed to claim this deduction.

Put your money to a good cause

Close

The deduction under section 80G of the Income Tax Act not only benefits you but also puts your money to be used for something good. It allows donations made to specified relief funds and charitable institutions to be deducted from taxable income.

However, only donations made to the notified relief funds and charities are eligible for deduction. Another important clause to the section is the mode of payment to these charities. The deduction won't be allowed if the donation exceeding Rs 2,000 is made through cash.

There are several notified charities and relief funds through which a deduction of 100 percent can be claimed. Some of the examples are: National Defence Fund set up by the Central government, Prime Minister’s National Relief Fund, National Foundation for Communal Harmony, National Illness Assistance Fund, National Blood Transfusion Council or to any State Blood Transfusion Council, National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities, among others.

There are certain notified funds where 50 percent of the amount donated can be claimed, including Jawaharlal Nehru Memorial Fund, Prime Minister’s Drought Relief Fund, Indira Gandhi Memorial Trust and Rajiv Gandhi Foundation among others.

Some funds allow a deduction with an upper limit.

Scientific Research and Rural Development

Donations made to an approved research association or a University which has as its object the undertaking of scientific research or to a for scientific research or rural development can be claimed as deduction. The deduction will be allowed only if the amount exceeding Rs 2,000 is made through modes other than cash.

Political Parties

Under section 80GGC of the act, any donation to political parties or electoral trusts made by an individual can be claimed as a deduction. However, the deduction is allowed only if the donation is made through any mode other than cash.

Electoral Trust is a non-profit company that receives voluntary contributions made by people and then distribute the same to respective political parties. It ensures transparency in donations made to political parties.

Sukanya Samriddhi Yojna 

If you have a girl child below the age of 10, then there's another deduction that you can claim under this government scheme.

Sukanya Samriddhi Yojna (SSY) was introduced under Prime Minister Narendra Modi's 'Beti Bachao Beti Padhao' campaign. Under the scheme, the parents or legal guardian of a girl child can open an account at any time until she is 10 years of age.

You have to make a minimum deposit of Rs 250 a year. If the minimum amount is not deposited, you have to pay a fine of Rs 50. The maximum amount that can be deposited in a year is Rs. 1.5 lakh.

The account matures 21 years after the date of opening. It can be closed on the marriage of the girl child above the legal age of 18. Control over the account is in the hands of the girl child after the age of 18. To promote the scheme, the government provides tax benefit on the amount deposited in this scheme. Amounts invested in SSY can be deducted from taxable income up to Rs 1.5 lakh per year under Section 80C of the Income Tax Act.
Smriti Chaudhary

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