Offbeat Tax Saving Tips

By sahanamailar | December 17, 2015

Offbeat Tax Saving Tips

The fiscal year 2014-15 saw a general increase in the wealth of Indians. The election of a new pro-business government has shaken up the system for good, and the latest figures from leading financial agencies around the world have pegged India’s expected GDP growth in excess of 7.6% this fiscal.

The signs are clear that you will earn more this year than you did in the last one. Salaried people may not be that lucky, but investing in debt and equity investments will likely see better returns for them also. And with the repo rates being decreased twice by the RBI outside of policy review this year alone, loans will become cheaper and spending more prominent.

What are tax breaks?

Tax breaks or tax exemptions are the government’s way giving you a little bit of a relief from paying a third of what you earned.

India’s taxation system is quite notorious for its complexity, and even the most arduous law students find it difficult to thoroughly study the concerned laws. However, tax exemptions are available in every nook and corner of serious expenses if you look closely enough, such as healthcare, education, banking, insurance and so on.

Some offbeat means to save on taxes without going through the trouble of having a banking contact in Switzerland are:

Caring for sick dependents

So apart from the moral and spiritual benefits of caring for chronically ill dependents, there’s a financial component that you can also benefit from. The lawmakers were prudent enough to understand that caring for a chronically ill dependent can make a large dent in a person’s finances. So, under Section 80DDB, you can claim deductions up to Rs. 40,000 (Rs. 60,000 senior dependents) per annum.

The deduction is meant for specific diseases such as Parkinson’s disease, ataxia, haematological deformans, motor neuron disease, chronic kidney failure, and other similar diseases.

Minimizing capital losses

So you have had to pay interest for long or short-term capital gains as and when you make them. But did you know that in case you can’t post a profit on some particular financial instrument, you can balance off the losses with other capital gains? How this works is supposing you earned Rs. 15 lakhs by selling your house (capital gain), but lost Rs. 5 lakhs by selling your long-term stocks (capital loss), then you only have to pay taxes on the adjusted amount of Rs. 10 lakhs.

Short-term losses can be balanced through other short and long-term gains, while long-term capital gains can only be balanced against long-term capital losses.

Additional Reading: How to save tax on long-term capital gains

Political party donations

The politicians look after their own, and so you have the luxury of making donations to political parties and receive half to full exemption on the deposited amount. The relevant income tax sections here are Section 80GGC (for individuals) and Section 80GGB (for corporate organizations). And you can potentially donate up to 10% of your annual income – translating to substantially less taxes on the remaining amount for you.

Upping the ante

The much-loved Section 80C has made an upgraded entry in this year’s national budget. The Section 80C provides tax exemptions on premiums paid on Life Insurance policies. In fact, this section is such a masterstroke by the government that Life Insurance policies are now generally opted for to get tax breaks. The bottom line is people are buying Life Insurance policies – the primary aim of the government.

Another popular Income Tax Act, the Section 80D deals with tax exemptions on Health Insurance premiums. For instance, an average Indian citizen can avail tax exemptions up to Rs. 25,000 (up from Rs 15,000 previously), while a senior citizen paying Health Insurance premiums can file for exemptions up to Rs. 30,000 (up from Rs. 20,000).

All of these deductions, apart from common avenues such as Home Loan EMIs, HRA, medical benefits, etc. can help you save a large chunk of money at the end of the year.

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