Seven points to remember while filing ITR

Central Board of Direct Taxes (CBDT) has extended the last date of filing income tax return ITR of fiscal year 2020-21 by three months to December 31, 2021. Many of us wait till the last and in a hurry to file, arrange all the papers and information in a clumsy manner. Since we have time now, we can double check everything. Moeny9 provides a ready list of top 7 things which you have to check in advance.

Section 80C

Section 80C of the Income Tax Act offers deduction up to Rs 1.5 lakh on various investment instruments. So before filing ITR for a specific fiscal year, you should keep all documents regarding investments under this section handy. ELSS, PPF, SCSS, EPF, tax-saver FDs, NSC, Sukanya Samriddhi scheme, ULIP, post office term deposit and among many other instruments come under this section. You should not miss anything if you have invested in these between April 1, 2020 and March 31, 2021.

Investing through SIP has become a popular mode of investing. But, if you are looking to save tax by investing in ELSS, remember that each SIP installment will have a lock-in period of minimum 36 months. Many taxpayers choose to invest in ELSS, which comes with section 80C tax benefit, based on their recent performance.

One of your safest bets can be investing in PPF. It is a government-backed retirement benefits scheme that is entitled to deduction under section 80C of the Income Tax Act. It can be opened by both salaried and non-salaried individuals for long-term investments. In terms of liquidity, PPF has a lock-in period of 15 years. But the money can be withdrawn partially after 7 years. The tenure of your PPF account can also be extended further up to 5 years.

Deduction on pension related investment

Contributions made towards the National Pension Scheme are allowed for deduction under section 80CCD(1). You can contribute an additional amount of Rs 50,000 as well in the NPS, which will eventually be deducted under section 80CCD (1B) because under section 80C and 80CCD (1), investments must not exceed the limit of Rs 1.5 lakh.

If you are contributing towards the Atal Pension Yojana, you are allowed a deduction under section 80C and 80CCD (1) of the Income Tax Act.

Tax deduction on health insurance

You and your family’s health insurance premium qualify for deduction under section 80D of IT act. Also, under section 24, your principal repayment towards a home loan comes with a tax advantage. Make use of these tax provisions and take benefit while filing ITR.

Payment of home loan

Just in case, you had repaid a principal amount of your home loan in FY 2020-21, do not forget to take tax benefit on it. The principal in the EMI qualifies for tax benefit under section 80C, while the interest paid is deductible under section 24.

Education loan interest

If you have an active education loan, then your loan’s interest is eligible for tax deduction. Don’t forget to file this while filing ITR. So make sure you have the loan statement for the fiscal year in your hand.

Tuition fees

A person can claim a deduction on the amount paid as tuition fees to a university, college, school or any other educational institution. Other components of fees like development fees and transport fees are not eligible for deduction.

The maximum deduction on payments made towards tuition fee can be claimed for up to Rs 1.5 lakh in a fiscal year.

Asset allocation

Even while you save tax, do not go overboard and invest only in one asset class. For goals that are near, bank FD, mutual funds with tax benefit or NSC may be suitable. For goals such as retirement planning or child education or marriage equity based or hybrid instruments are better and may be appropriate.

Diversification across different asset classes will help in keeping risks under control as well as saving more tax.