Minimise your tax outgo

Under this section one can get a maximum deduction of Rs 1 lakh. Some of the instruments in which you can invest under this section are Employee Provident Fund (EPF),Public Provident Fund (PPF),National Savings Certificates VIII (NSC),five-year bank fixed deposits,life insurance policies,equity-linked savings schemes (ELSS),unit linked insurance plans (ULIPs),school fees and repayment of home loan principal. The maximum amount that you can invest in PPF in a financial year is up to Rs 70,000 under PPF rules.

Section 80D

If you have paid the premium on medical insurance policy for self,spouse,dependent parents and children,you are eligible for deduction up to Rs 15,000 under this section. If the parents are senior citizens,then you can avail of a deduction of up to Rs 20,000 if you pay the medical insurance premium on their behalf. Thus,one can avail of aggregate deduction of up to Rs 35,000 under this section.

Section 80DD

If you incur an expense on the medical treatment of a dependant with disability,that qualifies you for a tax deduction of up to Rs 50,000 under this section.

Section 24

Under Section 80C you avail of tax benefit on the principal repaid on a home loan. For the interest component on a home loan that you repay,you are allowed a deduction under the head ‘income from house property’ under Section 24. The maximum limit is up to Rs 1.5 lakh a year in case of a self-occupied house. This claim can be made even on loans taken for repair,renewal or reconstruction of an existing property. If the house is let out,the upper limit of Rs 1.5 lakh will not apply (the entire interest repaid will be eligible for deduction). If the self-occupied house is jointly owned by husband and wife,and if the loan interest comes to,say,Rs 3 lakh,both husband and wife can claim Rs 1.5 lakh each in their individual tax returns.

Section 80G

While donations should ideally be made for philanthropic reasons and not to save on taxes,one can always make a few more at the end of the year.

Reduce capital gains tax liability

Finally,here is a bit of jugglery you can do in order to save tax on capital gains from shares. Since the Sensex has risen steeply during this fiscal year from a low of 8,000 in April 2009 to a high of over 17,000 in January 2010,the tax payer may have made short-term capital gains during the current year ending on 31st March,2010. Normally,the tax payer has to pay a short-term capital gains tax of 15 per cent on such gains if he has sold his shares after holding them for less than a year and has paid the securities transaction tax (STT) on the transaction.

However,by and large,most investors have some shares that have gone down in value compared to their cost of purchase. Investors often do not sell such shares in the hope that their prices will rise at least to the level of their purchase cost. Such tax payers could consider selling off these loss-making shares and booking the loss. This loss can then be set off against the short-term capital gains they have made on their profitable shares. Taxpayers could buy those very shares back after the sale if they believe that they will rise back to the original purchase price. Tax laws do not recognise mere notional loss. Loss has to be actually incurred. This exercise will help you save tax on the short-term capital gains you have earned on listed shares.

The author is a Mumbai-based chartered accountant