A junkyard owner once tried to write off the cost of cat food. He claimed the feral cats it attracted helped him keep snakes and rats off the property. Did you know the government once let a bodybuilder successfully write off a huge sum in tanning oil? There’s a whole world of obscure, industry-specific income tax deduction you could be missing out on as a small business owner without even knowing it. So how do you find these lesser-known deductions?
Make sure you’ve deducted the less obscure ones first.
Did you know you can claim a tax deduction on stamp duty? Or if you use a specific part of your home exclusively for business, you may be able to claim the home office deduction?
Before you start claiming cat food on your business tax return, make sure you’ve deducted the other lesser-known expenses first. Take a look at a list of some of the lesser-known investments and expenditures that are eligible for tax breaks.
Let’s dig out some of the lesser-known ones!
Income Tax Deduction: Saving the environment with benefits to Electric Vehicle buyers u/s 80EEB
🏎️ Interest on loan for the purchase of an Electric Vehicle is exempt. This deduction is available from A.Y. 2020-21 i.e. the loan should be sanctioned between 1.4.2019 to 31.3.2020. This deduction is included under Section 80EEB.
The maximum permissible deduction is INR 1,50,000
Look out for…
- Only interest expense to be allowed as a deduction
- The assessee should be an ‘individual’
Fulfilling the dream for first time home buyers u/s 80EE and 80EEA
🏡 Claim deduction U/S 80EE and 80EEA on interest paid on a home loan taken by a first-time homeowner.
- 80EE
Interest on loan should be sanctioned between 1.4.2016 to 31.3.2017 for the purchase of the first house. It is applicable to ‘all’ taxpayers. Section 24 can be claimed to provide exemptions up to INR 2.5 lakh.
Deduction Amount – INR 50,000
Look out for:
- Loan Amount should not exceed INR 35 Lakhs
- 80EEA
Interest on loan should be sanctioned between 1.4.2019 to 31.3.2020 for the purchase of the first house. Applicable to ‘individual’ taxpayers. Section 24 can be claimed for exemptions up to INR 3.5 lakh.
Deduction Amount – INR 1.5 Lakh
Look out for:
- Stamp duty cost should not exceed INR 45 Lakhs
- Shouldn’t have taken any deduction U/S 80EE
Income Tax Deduction – Benefits to contributing members of society u/s 80G
💰 Donations made to certain relief funds & charitable institutions U/S 80G are tax-deductible. Additional documents like Stamp Receipts and Form 58 are also required as proof of donations.
There are 3 types of deduction eligibility:
i. 100% or 50% without any qualifying limit
ii. 100% subject to the qualifying limit of 10% of adjusted gross total income
Look out for:
- ’Cash’ payment of more than INR 10k in not eligible
Read on: https://learn.quicko.com/section-80g-deduction-for-donation-to-charitable-organisations
80C Deduction – Benefits for nurturing the children
📚 Playschool, nursery, and pre-nursery fees for children are eligible for deduction U/S 80C. The benefit is restricted to 2 children per individual. So a couple can claim a deduction for the fees of 4 kids.
Maximum permissible deduction: INR 1.5 Lakh
Look out for:
- Late fees, donations, etc are not eligible.
Income Tax Deduction – Rent to parents cuts tax u/s 10(13A)
👪 Rent paid to parents for residing in their property is tax-deductible U/S 10(13A). This can help save hard-earned money for the entire family. Also, parents are still eligible for the standard deduction.
Deduction Amount (the lowest out of the following)
- Actual HRA received
- rent paid over 10% of salary
- 50% of basic salary (40% if you live in a nonmetro)
Look out for:
- It is important to make the landlord-tenant equation official.
Income Tax Deduction – Benefits for the better health of your parents u/s 80D
🩺 Recurring medical expenses of elderly parents can be claimed U/S 80D. The medical expenditure incurred by parents only if they are above 60 years of age.
Maximum permissible deduction- INR 50k
Look out for- Not allowed if parents already covered by a health insurance policy.
Income Tax Deduction – Benefits for higher education u/s 80E
🎓 Interest paid on repayment of education loan is eligible for deduction U/S 80E. The exemption is allowed only to ‘individual’ taxpayers. The loan must be for self, spouse, or children, and the repayment must be done by the taxpayer. Producing a certificate of repayment to your employer is mandatory.
Maximum deduction amount: INR 1.5 Lakh
Look out for:
- The deduction is available only for 8 consecutive years.
Income Tax Deduction – Exemption for the Innovators u/s 80-IAC
💡 Section 80-IAC provides a deduction for 100% of the income i.e. profits and gains of an eligible startup
The following conditions are mandatory to be eligible for the above deduction:
- Should be a Pvt. Ltd. Company or an LLP incorporated after 1.4.2016
- The turnover limit should be INR 25 cr.
- Certificate from the Inter-Ministerial Board of Certification is compulsory
Deduction Amount- 100% of income for 3 out of 7 years from the year of incorporation
There’s a whole world of TAX DEDUCTIONS you could be missing out on. But these deductions will help you save up your hard-earned income. Make sure to claim them this Tax Season 2020!
Hey @sushil_verma
There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.
Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.
For eg,
Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.
The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).
As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!