Tax Saving Secrets 2020

About Tax Saving Secrets 2020

Benjamin Franklin famously stated that the only two things in life that are certain are taxes and death. While there is little anyone can do about the latter, there are a lot of steps you can take to cut down the amount of cash you pay toward the former. Here are some secrets that can help you save tax over and above the tax-saving investments you make during the year.

1. Turn stock losses into tax gains

Can you make a profit from the short-term losses you have made on stocks? Yes, says the Income Tax Act. Sandeep Shanbhag, director of Wonderland Consultants (a Mumbai-based tax planning and financial consultancy), says “short-term capital losses can be set off against both taxable long-term capital and short-term capital gains, but long term capital loss can only be set off against taxable long term capital gains” If you have sold some junk stock and made a short term loss of around 3 lakh. You can set this loss against the gains from the property.

How much tax can you save:

You can save Rs. 60,000 by setting off a short-term loss of Rs 3 lakh against longterm gains.

Proof required:

You have to keep a record of your equity trading account with details of all the transactions you have made that resulted in the loss.

2. Get a deduction for rent even without HRA

House rent accounts for as much as 40-50% of the entire household expense. That’s why the house rent allowance has been exempted from tax to a certain limit. But what if you are self-employed or businessman? Under Section 80GG, you can claim a deduction for the house rent paid even if you are not getting HRA. “there are so many people that are not aware of this,” says chartered accountant Mehul Sheth. If you live in your parents’ house, you can pay rent to them also. If your parents are not having any other source of income, this can bring down your tax liability.

How much tax can you save:

Under section 80GG, a person can claim a deduction of more than 2,000 per month.

Proof required:

A taxpayer needs to declare that rent is being paid and is not receiving house rent allowance on Form 10-BA.

3. Pay lower tax if the dependent is ill:

The money spent on the treatment of chronic illness can affect the financial budget of a taxpayer. For this, this income tax Act has allowed a taxpayer to claim a deduction if his dependent who suffers from any chronic illness specified under Section 80DDB. The deduction is higher if the patient is a senior citizen. Dependents can include children, spouses, parents, and siblings. Patient should be mainly dependent on the taxpayer.

How much tax can you save:

A patient can save up to 12,360 if the dependent is patient. If the dependent is a senior citizen, the tax can be deducted by 18,540.

Proof required:

A taxpayer needs to provide a certificate of the illness from a specialist in government or a certified hospital.