Monday, August 10
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4 THINGS YOU MUST KNOW ABOUT TAXES

Filing taxes can be confusing, even for those who have done it a few dozen times. It might seem especially complex to those who are new to doing their own taxes; but they don’t have to be. Unless you really love math and solving complicated equations, you are perhaps going to use some type of tax filing software, and that wouldoffer you with step-by-step directions to help you through the tax-filling process.

But there are still a lot of things you should know to do your taxes correctly and get the most substantial refund possible to save tax. Here are 4 things you should be aware of before you sit down to do your taxes.

  1. If you are paying rent, then you can use it in your benefit to save tax

HRA, House Rent Allowance is a crucial source of tax saving. HRA is a part of the salary you receive from your employer and is deducted from your annual income.

Lowest of the following three conditions is deducted:

(i) Actual HRA provided by the employer

(ii) Actual house rent paid, minus 10% of Basic + DA

(iii) 50% of Basic plus Dearness Allowance if situated in Delhi, Mumbai, Chennai or Kolkata; otherwise 40% Basic plus DA.

Ensure that you take rent receipts from your flat owner. If the gross rent paid is in excess of Rs. 1 lakh, copies of the home owner’s PAN card and registered lease agreement must be submitted.

  1. You can save tax and also grow your wealth at the same time

There are certain tax saving mutual funds such as ELSS Funds (Equity Linked Savings Scheme), and other 80C tax saving options like PPF (Public Provident Fund), EPF (Employee Provident Fund), NSC (National Saving Certificate), Bank FDs (Fixed Deposits) etc. that are made available to the investors as per section 80C of the IT Act, 1961 give tax rebate. There are different lock-in periods associated with different investment options under 80C. Among these different options under 80C, ELSS mutual funds have the lowest lock-in period of 3 years.

  1. Some expenses are tax-deductible

There are specific personal expense allowances provided by your employer which are eligible for exemption from tax. Some of them are:

  1. Education Loan Interest
  2. Medical Expenses including preventive health check-ups
  3. Life Insurance Premium
  4. Medical Insurance Premium
  5. Dependents Healthcare
  6. Housing Loan Interest and Principal

The exact amount of tax deduction varies from different tax saving instruments.

  1. Doing good can help you save taxes as well

Donating to a charitable cause can aid you to save tax. Section 80G of the Income Tax Act, 1961permits you to decrease up to 10% of your adjusted annual income by donating to particular charities.

It’s always suggested to begin with your investments in the first quarter of the financial year so that you can spread your mutual fund investments over the year. Doing this won’t burden you at the end of the year and will also permit you to make informed investment decisions. Happy investing!