The complexities of the tax framework are something that many books have been expounded on. The tax deductions and tax exemptions support the notion. In case there's a detract from it, it is this: with regards to taxes, we discharge our tax liabilities on our taxable income and are able to save with the interest earned in our kitty.
All residents including senior citizens need to make online payment of income tax precisely and dependably. Long term investment plans should be designed in a reasonable manner and assists them with meeting life objectives.
There are different sections and subsections under the Income Tax Act of 1961. These sections empower to save money or at least make tax free investments.
A new portal has been launched this financial year by the income tax department. The new website as income tax India e-filing gov.in portal for the ease of filing returns and tax payments.
To comprehend why we ought to be saving money on taxes, it's maybe important to comprehend why we ought to be saving at all and the explanation is basic; reserve funds are basically the soul that permits us to arrive at any monetary objective in our life.
One can make a wise investment by investing in fixed deposits which would give fixed risk free return. Or can even invest in mutual funds based on their preference and choice. One should begin saving as ahead of schedule as conceivable to design their accounts and objectives fittingly.
It is advisable that income should be spent in the ratio of 5:3:2.
Half of the income ought to be spent on necessities. 30% of the remaining half should be spent on individual needs and the remaining 20% ought to be the saving reserves. However, the percentages of spending's may vary as per one's own choice and preference for the not so necessary proportion.
Best Tax Savings Schemes-Most Beneficial Investment Plans
It is time to file Income Tax Returns for the financial year 2020-21. Let’s dive into 5 important provisions that will help you with tax savings.
Section 80C
Section 80C of the Income Tax Act, 1961, is one of the most popular tax saving options. Taxable income can be reduced by making tax-saving investments specifically made for availing deduction on taxes. In a financial year, a maximum deduction of Rs 1.5 lac from gross total income is allowed u/s 80C.
One can opt to invest in-
Public Provident Fund (PPF)
Employee Provident Fund (EPF)
Life insurance premiums
Equity linked saving schemes
Many more tax saving plans based on the taxpayer’s personal requirement
Section 80CCD
Discharging income tax liability in an accurate and timely manner is extremely crucial in nation building. One needs to act responsibly to pay your taxes on time. Several provisions in the Income Tax Act of 1961 are made which allow deductions against investments in specific avenues. One of the most popular investment plans is deductions under Section 80CCD.
Deduction under this section is available for contributions made to the National Pension Scheme (NPS) or the Atal Pension Yojana (APY). Contributions made in NPS by the employer are also covered under this section. A notified pension scheme called NPS has been introduced by the Government of India
Section 80CCC
Section 80CCC of the Income Tax Act of 1961 provides a maximum deduction of Rs. 1.5 lac per annum. It is mainly for contributions made towards specified pension funds offered by life insurance. The deduction is within the limit of section 80C available for Individuals.
Exemption limit includes purchase of a new policy or payments made towards renewal or to continue an existing policy. The purchased policy must either provide pension or annuity for a period. This is a primary condition for availing this exemption.
Section 80C reads with Section 80CCC and Section 80CCD(1) permits to claim a maximum deduction of Rs. 1.5 Lac every financial year. Individuals either purchasing a new insurance policy or paying towards old policy renewal can take tax advantage from this section. The payment is required to be made from their taxable income.
Section 80D
Deduction on the premium paid for medical insurance is allowed as deduction u/s 80D. Individuals and HUF can claim a maximum deduction of Rs. 25,000. The deduction is for insurance of self, spouse and dependent children.
An additional deduction for the insurance of parents below 60 years of age up to Rs.25000 is allowed. Rs. 50,000 is allowed as deduction for parents above 60 years of age. Both working parents can be insured separately and the deduction will lead to great tax savings.
Section 80DDB
Deduction on medical expenditure for oneself or dependent relatives is allowed u/s 80DDB. A maximum of Rs.40,000 is allowed as deduction against medical expenses for individuals and HUFs below the age of 60.
Senior citizens and HUFs can claim medical expenditure deduction up to a maximum of Rs. 1,00,000. Reimbursements for medical expenses by an insurer or employer can also be claimed under Section 80DDB.
Section 80E
Education loans not only aids finance for studies abroad but also save you a lot of tax as well. Repayment of interest component on education loan is allowed as a deduction under Section 80E.
The deduction is not allowable for components other than the interest paid as part of the EMI. The principal component does not qualify for the tax deduction under this section.
The total interest part is allowed as deduction as part of the availed loan’s EMI during a particular financial year. However, no limit on the maximum amount has been placed that is allowed as deduction. Only resident individuals are eligible to claim this deduction.
Section 80G
Deductions on donations towards social causes such as charity and other noble causes are allowed u/s 80G. Certain eligible donations qualify for a 100% deduction. Donations with 50% deduction with a qualifying limit or cap on how much can actually be deducted from the tax portion.
One of the most popular tax-saving investments is Section 80G. Not just from a deduction point of view but also includes the element of doing social good. High Net Worth Individuals avail this section primarily to save taxes by no means restricted to these. It is a great way to save taxes and create a positive impact on the society if utilized wisely.
Section 16
Deduction from income chargeable to tax under the head ‘salaries’ is allowed u/s 16 of Income Tax Act, 1961. The standard deduction, entertainment allowance, and professional tax are all allowed as deductions under this section. A salaried taxpayer can lower his/ her taxable salary income subject to tax by means of this section.
The advantages of this section have extended to a higher amount with the recent amendments to the standard deduction. The hassle of providing bills for travel and medical no more exists thereby making it quite easy to claim.
Section 24
Maximum deduction of Rs.2,00,000 on home loan interest in case of self occupancy or vacancy is allowed u/s 24. The entire interest amount can be deducted from the income generated from the property, if rented. This section is one of the most popular tax-saving investment plans used by most of the taxpayers in India. It allows them room to have their own property and generate tax-free income from that property at the same time.
Conclusion
Apart from the above, one can invest in the National Pension Scheme and avail an additional deduction of Rs. 50,000. Availing an education loan and claiming deduction on its interest component repayment is another smart way to save tax. Deduction u/s 80E is a great way to save on children’s education by working parents.
One can claim deductions and save on interest income up to Rs 10,000 u/s 80TTA. The following are eligible for deductions-
Interest earned from a savings bank account
Interest earned from savings account with a cooperative society running banking business
Interest earned from savings accounts with a post office
These are the most commonly claimed deductions. It is important to note that not all these ways might be applicable to you.
Analyse and choose the relevant and most beneficial sections applicable to you. Make the most of them to your advantage. Every bit counts when it comes to tax saving. Handling taxes effectively creates a positive impact on disposable income and savings.
Consequently, it impacts financial goals as well. Research, consult and accordingly make decisions that suit your needs best and save smart
#idhiabbaimatter ..
Comments
Post a Comment