A chartered accountant can help you in filing income tax and also guide you on how to save on tax through the deduction of tax exemptions. This article explains how this is done.
Tax planning and filing can be complex for businesses and individuals. If you are not careful, you can make mistakes that may expose your business to liabilities. The income tax offers several deductions that the taxpayer can claim while filing the income tax return for the end of the year. The deductions may be from expenditures, investments, or savings made by businesses or individuals. All eligible taxpayers in India are required by law to file income tax returns each year, one should also know about Income tax return filing for nonresident Indians.
No one enjoys paying taxes; you’ll always find people who try to avoid or evade it; the ramifications of evading taxes are dire. Did you know that you can legally reduce your tax burden or liability? With proper tax planning, you may take advantage of tax rebates, concessions, and deductions to save on taxes. Taxation systems and laws are complex for individuals who are not trained in tax management. That is where a qualified online CA comes in handy.
This article explains how a chartered account can legally help you reduce tax liability.
Increasing Your Contribution to the National Pension Scheme
The National pension system (NPS) is a mandatory retirement saving scheme by the government of India. Citizens aged 18 and 60 years under employment by corporate entities must register under NPS and make monthly contributions. All contributions to the scheme are tax-free. However, there is a limit of ₹5 lakhs. You may tell your employer to add an extra ₹50,000 to NPS contributions, which will also be tax-free.
Make Donations to Charity or Religious Organisations Closest to Your Heart
Incomes contributed to social causes to certain organizations qualify for tax exemptions under section 90G of the IT Act. Social funds such as the PM Cares Fund, national defence fund, and PM National Relief Fund also qualify for tax deductions. You may get a complete list of such institutions from the Income Tax Department’s official website.
Support Your Preferred Political Party With Financial Contributions
Contributions to political parties registered and approved by the election commission also qualify for tax deductions of up to 50% or more. It is important to note that payments made in cash form are not eligible. You must send the contritions cheques or bank transfers.
Support Your Parents With Money for House Rent
If you live with your parents, you could pay the house rent for them. Section 10-13A of the income tax has provisions for House rent allowance (HRA) exemptions. %0% of an employee’s salary qualifies for House Rent Allowance tax exemption if the individual lives in rented accommodation. If you live with your parents, you must make a rental contract with them and transfer the stipulated amount to them every month. Otherwise, you’ll not qualify for tax deductions. One should also be aware of foreign income tax while filing ITR.
You Can Claim Tax Deductions for Education Loans.
Did you take a loan for higher education for yourself, your children, or your spouse? If yes, under section 808E, you qualify for tax exemptions against the loan. However, the interest on the loan is eligible for deductions, no matter the amount of money. HUF (Hindu undivided family) are not eligible for these deductions; only individual taxpayers qualify.
Support Your Children With a Loan or Gift
You may give your children an early inheritance through a loan or monetary gift. Such expenditures can be added to your income.
Gift Money to Your Parents
If you have excess funds, you could send them to your parents to inform them of a gift deed. The money may be invested under their names and therefore qualify for senior citizen tax exemption; the limit is ₹3 lakh, and those aged 80 years or more are eligible for up to ₹ 5 lakh. Not all gifts qualify for tax exemptions; make sure you keep all documentation that provides proof of eligibility for the gift.
Capital Losses Qualify for Exemptions
If you sell a capital asset at a loss, it may be eligible for tax deductions. However, it depends on the type of asset in question, the original price of the asset, the fair market price, and additional costs in case of any improvements. The asset could be jewelry, property, or other forms such as financial assets.
Make Contributions to Your Parent’s Health Insurance
Under section 80D of the IT Act, you can claim tax deductions from income made towards the payment of health insurance for yourself, your family, and your parents. Deductions may also be made against incomes paid towards medical expenses on parents who depend on you for financial assistance. However, parents below 60 years are not eligible.
Pay Life Insurance
Life insurance helps to secure your family’s finances in case of your untimely death. Depending on the type of cover, your family receives some financial benefit when you die. Life insurance premiums are eligible for tax deductions under section 80C of the income tax, one should also know about Section 80CCC of the Income Tax Act. It may be for yourself, dependent children, spouses, and members of the HUF (Hindu undivided family). You mustn’t buy life insurance policies for tax deductions but to provide your family with some level of financial security in case of your sudden demise.
VPF Withdrawal Is Tax Deductible
Emergencies such as accidents and illnesses are financially burdensome. VPF permits partial or complete withdrawals for such emergencies. Other situations where VPF withdrawals are allowed include paying dowry, higher education, paying the home loan, and payment towards the property.
Conclusion
Tax authorities are very strict and will always send you reminders to fulfill your tax obligations. Even though you may know your responsibility as a citizen and the importance of paying taxes, it is not something you do happily. The financial burden taxes place on you can be irritating and stressful, especially if you don’t know how to plan and file required documents. Many people lose a lot of money on taxes every year because they are unaware of certain exemptions and deductions.
A good chartered accountant can help you plan your taxes: https://incometaxindia.gov.in/ and guide you through different exemptions and deductions; as a result, you’ll save a lot of money in the year. If you want to learn how to file your income tax or hire an expert on your behalf, Vakilsearch has covered you. Life is too short to continue suffering with the complexities of tax filing.
