Tax saving is often a last-minute attempt and there are a few popular investment options such as life insurance and Public Provident Fund that taxpayers usually reach out for. If you have tried the popular methods and are still falling short of meeting your tax saving requirement, there are some lesser-known ways to save tax.
Here are some options that are easy on your pocket and can still give you the required tax breaks:
Withdraw old tax saving investments and reinvest them
This won’t need you to invest any extra money. If you have an old tax-saving investment instrument which has completed the lock-in period, you can withdraw the fund and invest it for for tax benefits.
So if you have a PPF investment that was made over seven years ago, you can make a partial withdrawal for further reinvestment. In case of tax saving equity-linked saving schemes (ELSS) upon finishing three-year lock in, you can withdraw the fund entirely, or even partially, to reinvest it.
Pre-school fees deduction u/s 80 (C)
This is not as popular as the deduction on school fees. If you are paying for tuition fees for children in pre-school, i.e. pre-nursery and nursery, you can avail of deduction under Section 80 (C). However, the benefits are restricted to two children per parent.
Premium payment of health insurance for parents
If you are paying the premium of medical insurance for your parents, you can avail a deduction of up to Rs. 25,000 under Section 80(D) of the Income Tax Act. If a senior citizen pays for the premium of his very senior parents, he/she can claim an additional deduction of Rs 50,000.
For medical expenses incurred for your senior citizen parents, you can avail of deductions up to Rs 50,000 under Section 80(D). However, the tax benefits in this case can only be availed if the expense is not covered under health insurance.
Interest payment to parents
Home loan interest payments are eligible for deduction not just when you borrow from the bank, but also from your parents. Your parents may be financing a part or the entire amount of the cost of the house. You can claim tax deduction benefits under Section 24B of the Income Tax Act. However, you need to have proper interest certificate from your parents as proof of interest payment.
Pay rent to parents
You can claim deductions under Section 80 (CG) for rent even if you are not eligible for HRA. If you live in a house owned by your parents, you can pay rent to them and claim deduction to lower your tax liability.
However, do check your parent’s tax liability to evaluate actual benefits. Also, make sure you have a proper rent agreement and rent slips from your parents as proof in the event of scrutiny from the IT department.
The writer is CEO, BankBazaar. The article has been published in collaboration with BankBazaar. Opinions expressed are those of the author.