ITR filing 2019-20: Don’t forget to use two new tax deductions
As the extended deadline for the income tax return filing (November 30) is approaching, most taxpayers are busy taking stock of taxes and investments. While it is a duty of every citizen to pay the eligible taxes, there is nothing wrong in saving every penny of the hard-earned money through legitimate means. Tax deductions available under Income Tax Act are some of critical tools to help you save taxes by reducing your taxable income which in turn reduces your tax outflows.
Since the current tax filing involves the income earned during the financial year 2019-20, you must check all deductions allowed in that financial year. Besides already available deductions, the government has also introduced two new ones for the income earned during financial year 2019-20, which individual taxpayers should take note of. These are linked to the purchase of affordable house and electric vehicle. We tell you how these deductions work and the essential conditions to avail these.
Deduction for interest on affordable housing loan
A new deduction under section 80EEA was introduced in the Finance Bill 2019 to give additional deduction of Rs 1.5 lakh on interest payment for a home loan taken for an affordable house.
The housing loan should have been taken only from a financial institution for the purchase of a residential property. To claim the deduction in the current assessment year the home loan should have been sanctioned by the financial institution between April 1, 2019 and March 31, 2020.
To be eligible for this deduction, the total value of the house measured as stamp duty value should not exceed Rs 45 lakh. You can claim this deduction only if you do not own any other residential house property on the date of loan sanction.
It is over and above the existing deduction of Rs 2 lakh available on interest payment of a home loan under section 24b. Therefore, this deduction will only be useful if the total interest payment on your housing loan was above Rs 2 lakh in financial year 2019-20. Therefore, you need to get hold of your home loan repayment statement and check the total interest paid during the year. If it is above Rs 2 lakh and you fulfill all the essential conditions, make sure that you get additional deduction.
Deduction for interest on electric vehicle loan
The government has been pushing green initiatives and giving incentives to promote the use of environment-friendly products. On similar lines an additional deduction of Rs 1.5 lakh was allowed under section 80EEB by the government on the interest payment on loan taken for electric vehicle by individual taxpayers.
You need to have vehicle loan only from a financial institution to get eligible for deduction under this section. The loan should have been sanctioned between April 1, 2019 and March 31, 2020. This deduction will also be in force in future for loans sanctioned till March 31, 2023 for future assessment years. The interest amount on which a deduction is being claimed under the section 80EEB cannot be claimed against any other section of I-T Act.
Not all electric vehicles are eligible to be claimed for this deduction. There are further conditions to be met. “Electric Vehicle means a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy,” states the Finance Bill 2019. So, the deduction is mostly for new generation electric cars that meet the conditions.