Paying a huge amount as income tax? Wondering how to avail tax rebates? There are ways by which you can cut down on your tax this year.
Taxes are an important source of revenue generation for the government. Your tax is used in various government projects, giving country’s economy a boost. This, in turn, guarantees social upliftment.
The government needs to maintain a balance in its taxation policy. Government needs to see that the common people are not burdened with tax. The government, thus, provides the citizens with different tax rebate options. The taxpayers can make use of these rebates to cut down on their taxes.
Moreover, there are many smart options to cut down on your income tax in India. Here are five methods that could help:
National Pension Scheme: Expect a discount of up to Rs.50,000 on your income tax if you have invested in National Pension Scheme (Section 80CCD). The amount exempted is in addition to the deduction of Rs.1.5 lakh under 80C, 80CCC, and 80CCD combined. Earlier studies found that a large part of the Indian population does not plan for post-retirement. NPS was introduced to encourage savings for retirement.
Health Insurance: Sections 80D, 8DDD, and 80DDB offer extra tax benefits on medical insurance. This is applicable for both self and spouse. You could also get tax exemption for the treatment of disabled dependent. Treatment of diseases like cancer or AIDS (self or family) is also eligible for deduction.
Home Loan and Interest: A practical investment decision is getting a home loan. You can claim the home loan tax benefits up to Rs.1.5 lakh under Section 80C. However, other forms of investment like Public Provident Fund (PPF) and equities are also part of Section 80C. Together they have a limit of Rs.1.5 lakh. However, there are two components for home loans: the principal and the interest. The interest component can be claimed under section 24 or 80EE and the amount could range be up to Rs.2 lakh. The home loan interest rate fluctuates over time. Therefore, make sure you get the current year’s value while filling out the form.
Income tax exemption for home loan has made investments in property very popular. Various banks and non-banking financial institutions offer pre-approved home and personal loans. These help you to save on time and enjoy fast processing of your home loan.
Long-term Capital Gains: Selling a property of more than two years of age is considered as a long term capital gain. The seller, therefore, has to pay a hefty tax on the amount received. However, you can invest the proceedings from such sales in other residential properties. The seller, then, is liable to get tax exemptions under Section 54.
House Rent Allowance (HRA): Most companies provide HRA to their employees as part of their salary component. The deductions for house rent can be claimed under Section 10(13A). Submit proof of rent, rent receipts, and some other details (owner’s PAN details) to enjoy tax exemptions.
However, there are some companies that do not offer HRA. If you happen to be employed with such a company, do not worry. Section 80GG allows you to claim HRA discounts when HRA is not a part of the salary component. The deductible amount will be the lowest amount among rent minus 10% of the total salary or Rs.5,000 or 25% of the total initial income.
Conclusion
There are also other options that can help you get a discount on your tax. You can opt to receive part of your salary in food coupons from your employer to reduce your taxable income. If you are eligible for telephone or fuel reimbursements, make use of them. If the company provides a vehicle, make use of that as well. Look for ways to cut down on spending which will give a boost to your disposable income.
Author Bio –
Gaurav is a blogger and he passionate about writing on different topics like Insurance, Tech, Automotive, Finance and many others. He has been creating SEO friendly content for more than 5 years. For more info you can visit his blog at Wisdom Ancient.
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