Savings/Contributions & Tax Benefits (Part-IV)

In continuation with my previous writings on ways to save taxes through payments made in selected avenues, we go ahead to discuss such other areas which results in  benefits to the tax-payer.

1. Deduction for Interest paid on loan taken for pursuing higher education (Sec80E)

• This deduction is available only to an individual assessee

• The individual must have taken a loan for pursuing higher education either for himself or any of his relatives (Relative meaning the spouse or children of that individual or the student for whom the individual is a legal guardian. The loan must be from any financial institution or any approved charitable institution.

• The deduction shall be allowed only in respect of any sum paid by him/her in the previous year by way of interest on such loan.

• Such amount should be paid out of his/her income chargeable to tax.

Quantum of Deduction: The amount paid during the previous year towards interest.

Period of Deduction: Deduction shall be allowed for 8 assessment years starting from the assessment year in which the assessee starts paying the interest on loan. Or until the interest thereon is paid by the assessee in full, whichever is earlier.

Meaning of Higher Education means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the State Government or Central Government.

2. Deductions in respect of donations to certain funds, charitable institutions, etc ( Section 80G )

• Deduction under this section is allowed to all assesses, whether company or non-company, whether having income under the head “Profits and gains of business or profession” or not.

• The donation should be of a sum of money .Donations in kind do not qualify for deduction.

• To be eligible, the donations should be made only to specified funds/institutions.

3. Deductions in respect of Rent paid ( Sec 80GG )

• This deduction is allowed to an individual.

• The individual should pay rent for his residential accommodation, whether furnished or unfurnished.

• The individual is either a self-employed person or if he is an employee, he is neither entitled to any house rent allowance nor a rent free accommodation.

• The individual, his or her spouse or minor child or a HUF of which he/she is a member, does not own any residential accommodation at the place where such an assessee ordinarily resides or at the place where he works or carries on his business or profession.

The deduction shall be minimum of the following amounts:

i. Excess of rent paid over 10% of Adjusted Total Income.

ii. 25% of the Adjusted Total Income.

iii. Rs.2000/- per month.

The assessee must file a declaration in Form No.10BA along with the return of Income to claim deduction under section 80GG.

- Rittique Phukan (CA)