Income Tax Return: 5 lesser-known tax-saving tips from Section 80
While many are familiar with common tax-saving avenues such as Section 80C investments like PPF, ELSS, HRA, or home loan interest, there exist lesser-known strategies that can significantly benefit individuals seeking to minimise their tax burden. Today, we'll delve into five such lesser-known tax-saving tips that can assist not only employees but also business owners and freelancers in legally reducing their tax liabilities.
For individuals who haven't yet purchased a house and incur substantial expenses on rent, there exists a beneficial provision within the Income Tax Act known as Section 80GG. This provision is particularly relevant for salaried employees without House Rent Allowance (HRA) or for self-employed individuals, freelancers, and business owners who reside in rented accommodations.
Under Section 80GG, individuals can claim income tax exemptions if they meet certain criteria. There are three conditions specified, and the least amount among these conditions determines the extent of the exemption.
Condition 1: Annual rent paid minus 10% of total income.
Condition 2: ₹5,000 per month.
Condition 3: 25% of total income.
To illustrate, suppose an individual has an annual income of ₹5 lakhs and pays ₹10,000 in monthly rent. The calculations proceed as follows:
1. Annual rent paid: ₹10,000 x 12 = ₹1,20,000 subtracting 10% of total income (10% of ₹5 lakhs = ₹50,000): ₹1,20,000 — ₹50,000 = ₹70,000
2. Second condition: ₹5,000 per month x 12 = ₹60,000
3. Third condition: 25% of total income (25% of ₹5 lakhs = ₹1,25,000)
The least among the three conditions is ₹60,000. Hence, the exemption under Section 80GG amounts to ₹60,000.
However, it's important to note two conditions before claiming the exemption. Firstly, if the
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