I have two daughters and a son. Can I claim a deduction for school fees paid for the three children under Section 80C of the Income Tax Act 1961?
Answer: Under the provisions of Section 80C, a person can claim a deduction for school fees paid for the education of two children up to a maximum of Rs. 1.5 lakh per annum along with other qualifying items. Since the law clearly provides that the tuition deduction under Section 80C can only be claimed for two children, you cannot claim the tuition deduction for all three children, but only for two of your children. However, if your spouse is also a taxpayer, she can claim the deduction for school fees paid for the third child. Even if the tuition paid for two children exceeds the threshold of Rs. 1.50 lakh, the deductible can be claimed by the spouse for those who have only two children.
I booked an apartment under construction and took out a loan for the same. I pay pre-balanced monthly installment (EMI) interest on the disbursed amount. Can I claim a tax reduction on mortgage interest for the house under construction?
Answer: The deduction for interest paid on money borrowed for a house under section 24(b) of the Income Tax Act 1961 is available from the year in which the construction is complete and possession is taken. Therefore, you will not be able to claim any deduction for interest until construction is complete and possession is taken. However, you may claim one-fifth of the total pre-EMI interest paid up to the year prior to completion, in five equal installments commencing in the year of construction completion with regular interest for the year . That said, note that the total interest for the year and one-fifth of the pre-EMI interest cannot exceed Rs. 2 lakh if the house is self-occupied. In the case where the house is rented, there is no restriction on the amount up to which the claim can be made under section 24(b). Further, the loss under head of house property can only be offset up to Rs 2 lakh against other income in the same year, and the unabsorbed loss can be carried over for offset with income from home ownership for the next eight years.
Question: I am an employee. Should I include interest earned on savings bank account and fixed deposits when calculating my tax liability?
Answer: When filing your income tax return (ITR), you must include all taxable income on your tax return, in addition to your regular salary. Interest on savings bank account and fixed deposits is fully taxable, and therefore, you will need to include any interest you have received and pay a tax advance if net tax payable after withholding tax (TDS) exceeds Rs. 10,000. However, you can claim a deduction up to Rs. 10,000 with respect to savings bank account interest but there is no deduction available for interest earned on the fixed deposit.
The author is a tax and investment expert
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