Income Tax –
If you are a salaried individual or an entrepreneur or you make a rental income or earn from your investments you have to pay taxes to the government. The Income Tax Act came into effect in 1961. Everything related to the collection, recovery, and administration of income tax comes under the section of the Income Tax Act. Also as a taxpayer, you may have multiple sources of income during your life. According to Income Tax 1961, your earnings or profits in a given financial year attract taxes. Every year a taxpayer is needed to file their Income tax return (ITR). The Income tax return includes the information on your annual income along with the payable tax which you need to file. Also, people feel taxes are a financial burden but they might be unaware of the knowledge of tax planning which makes the situation worse. Here are some ways you can save your taxes –
- Investment in tax-saving Options –
The best way of saving the tax is by investing in such kinds of instruments which lead to saving the tax. Also under section 80C of the income tax act, the government of India permits some tax deductions upon the invested amount for some instruments. It says that you can claim a tax deduction up to a maximum of Rs 1.5 lakh on the investments made in these instruments. Some of the tax-saving instruments are as follows –
• Public Provident Fund (PPF)
• Employees’ Provident Fund (EPF)
• Equity Linked Savings Scheme (ELSS)
• National Pension System (NPS)
• Sukanya Samriddhi Yojana (SSY)
• Senior Citizen Savings Scheme (SCSS)
• Fixed Deposits (FDs) of 5 years or more
By these methods, you cannot only save tax but also built long-term financial well-being.
- Home loan is a tax-saving tool –
Under Section 80C of the Income Tax Act, making payments for both the interest and principal amounts of your home loan is exempt from taxation.
- Making donations –
Making various kinds of voluntary donations to recognized NGOs is one of the methods to save taxes. Donations to various relief funds, like the PM relief fund, funds for control of drug abuse, clean Ganges fund, or make voluntary contributions to recognized NGOs. All these donations are completely exempt from taxation under Section 80G of the Income Tax Act.
- Additional Allowances in Salary –
Various allowances which include House Rent Allowance (HRA), conveyance, personality development, medical treatment, telephone, uniform, office entertainment, etc. can be made from your salary. You can also claim tax exemptions on your Leave Travel Allowance (LTA), twice in four years.
- Health Insurance Schemes –
You can buy a health insurance scheme and get an exemption from tax payments. Income tax provisions provide for deductions against premiums paid toward health insurance. You can now buy health insurance for yourself and your family members to help manage medical expenses in case of health emergencies or any unforeseen event and at the same time, avail tax benefits for premiums paid towards these policies.
- Filing for Tax Returns on time –
One of the most essential steps towards paying taxes is filing the tax returns within time and with the right documents. Once a deduction of a certain kind of tax takes place, one can only claim a tax refund if one is filing an income tax return, for that particular fiscal year.
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