March 31st 2017 is a sacred deadline when it comes to tax. If you are one of those citizens who wait till the last minute to file income tax returns, then March 31st is a very important date. March 31st could be the last date for you to file income tax returns, depending on the financial year you are filing ITR. You have to submit all investment proofs which enjoy tax deductions before March 31st. Forgot to do so? You could be in serious trouble.
Come March 31st all your friends say….Have you invested in ELSS, PPF, Tax saver FD, NSC and other tax saving investments to avail Section 80C deductions? All your friends say, invest…invest…invest….and save tax. Is there any other way to save tax? Let’s find out.
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How To Save Tax Without Investing?
Investing in financial products which enjoy tax benefits is an excellent way to save tax. But….Is it the only way?
1. Enjoy tax deductions on the tuition fees paid for your children
Your children might be studying in a school, university or a college and you pay the tuition fees. You get a tax deduction on the tuition fees paid for up to 2 children under Section 80C of the income tax act. The maximum deduction is INR 1.5 Lakhs a year. You get this deduction only for the fees paid for a full time course. You don’t get this deduction for the tuition fees paid for a private tuition/ coaching class. You get this deduction only for an educational institute based in India.
You have to repay a home loan taken for buying or constructing a house or an apartment. Your home loan EMI’s are divided into 2 parts: Home Loan EMI (Principal component) and Home Loan EMI (interest component). You get a maximum deduction of INR 1.5 Lakhs a year, under Section 80C of the income tax act, on the EMI (Principal) you repay on the home loan. You also get this deduction for stamp duty, registration and transfer fees, within the overall limit of INR 1.5 Lakhs under Section 80C.
What happens if you sell your property/house/apartment within 5 years of possession? Well…all your tax deductions on the home loan get reversed. All the tax deductions you have enjoyed will be added to your income, in the year you sell the property.
You also enjoy tax deductions under Section 24, on the interest (EMI component) paid on the home loan. The maximum deduction is INR 2 Lakhs a year. To enjoy this deduction, the construction of your home/apartment, must be completed within 5 years from the end of the financial year, in which you have availed the home loan.
If your apartment/house is not constructed within this time, you get a tax deduction of only INR 30,000 a year. You also get a tax benefit under Section 80EE, if you are a first time home buyer. The maximum deduction you get is INR 50,000 in a financial year, on the interest you pay on the home loan.
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Let’s say you had availed an education loan for higher studies and you are busy repaying it. You get a tax deduction under Section 80E, on the interest you pay on the education loan. You get this deduction only for the (EMI interest) on the education loan, paid during the financial year and not on the EMI (principal component). You can avail this tax deduction under Section 80E up to any amount, without any upper limit.
You get to enjoy the benefits of this tax deduction, only for a period of 8 years. The tax benefits start in the year you begin repaying the education loan for a period of 8 years or until the interest is fully paid, whichever comes earlier.
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