Some Income Tax Benefits you may not be Aware

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AS A common man, everyone wants to maximise the tax benefits. However, at times, unnecessary investments are made that impacts the cash flows.

While planning our investments, we should consider that the Income-tax Act, 1961 ('IT Act') already provides for some tax breaks on certain expenses and investments. Expenditure on rent, medical expenses, tuition fees are eligible for tax benefits. An individual should take care of these expenses and make an investment only for the shortfall so that he can use his money wisely. In addition to the above, some tax breaks that you may look into which many people may not be aware are:

RGESS benefit can now be availed for three years:

From FY 2012-13, deduction under Rajiv Gandhi Equity Saving Scheme (RGESS) is available for three years. Additionally, if your gross total income is up to Rs 12 lakh, then also you can take the benefit, compared with 10 lakh limit earlier. The maximum permissible investment under the scheme is Rs 50,000 and the investor will get a 50 per cent benefit on the amount invested. Hence, an individual having income of Rs 12 lakh (com ing in the 30 per cent tax bracket), will save Rs 7,725 every year.

Additional Rs 1,00,000 interest benefit on home loan:

An individual buying a first house can now claim a total deduction of Rs 2,50,000 on interest paid under section 24 and 80EE of the IT Act. This will result in a total saving of Rs 30,900. Moreover, if interest for FY 2013-14 is less than Rs 1,00,000, the balance can be carried forward and claimed as a deduction in FY 201415. There are some important points for claiming this deduction: Loan should be taken between April 1, 2013 and March 31, 2014 Loan amount should not exceed Rs 25,00,000 Value of house acquired is up to Rs 40,00,000 The buyer doesn't own any house on the date of sanction of the loan Many of us who are first time homebuyers can take this buffer and plan their investments accordingly.

Interest repayment for renovation of house:

While principal repayment on housing loan is allowed deduction under section 80C of the IT Act, interest is allowed as a separate deduction under section 24 and 80EE of the IT Act. A self occupied property entails a deduction of Rs 1,50,000 for interest paid and the entire interest is allowed as a deduction for a let-out property. Most of us will not miss the above deductions but what we may not know is that interest paid on loan taken for renovation of existing property is allowed as a deduction up to Rs 30,000, subject to certain conditions. So if you have a loan that is taken for renovation, interest up to Rs 30,000 can be claimed as a deduction.

As this is the beginning of the financial year for tax purposes, you should plan your expenses and investments properly. This will help in making the right investment and increasing your cash flows. You can invest the balance money in schemes where you get more returns.

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