First of all, we try to understand what is Income tax? Income tax is a type of tax that is imposed by the central government on income generated by an individual from 5 sources are:
1. Income from Salary,
2. Income from House Property,
3. Income from Business/Profession,
4. Income from Capital gain and
5. Income fromOther Sources
The calculation of Income tax is very complex and typical, we will not discuss here the calculations, Here I will only discuss How a common man can save income tax by knowing some basics of Income Tax?
So, as an individual, how you will save tax, we will know in 4 simple steps,
Step 1 Calculate your income from different sources like Income from salary, Income from House Property and So on……
Step 2 Club your income from different sources which I discussed above, you will get Gross total income.
Step 3 After calculating Gross total income, you can avail some deductions in your income which will reduce your income legally, which we call Tax planning. Now, we will discuss some deductions which can reduce your income and save tax.
Step 4 Now we come to the step which will reduce your income and tax
a) Tax Deductions Under Section 80C
If you invest your money in these Plans, you are eligible to take deductions
• Public Provident Fund, Employee Provident Fund, Five-Year Post Office.
• Five-Year Tax Saving Bank Fixed Deposit, National Savings Certificate.
• Premium payments made towards Life insurance policies
• Tuition fees for children’s education
• Repayment of principal amount on the home loan, Registration fees, and stamp duty for house property
Maximum deduction - Rs 1.5 lakh can be claimed under it.
b) Tax Deductions under Section 80D
The taxpayers can claim Rs 15,000 as a deduction at the time of making a payment towards health policy taken under the name of their wife or children or self. If the person is over the age of 60 years, he or she can claim an income tax exemption of up to Rs. 20,000.
c) Tax Deductions under Section 80E
Providing education to their kids or a dependent should not be a burden for anyone in the country. Hence, under this section, the IT Act has made it possible for the parents and guardians to claim income tax exemptions on the tuition fees paid by them.
d) Tax Deductions under Section 80G
If you contribute a certain amount to a charitable fund, you can get the benefit of enjoying the deductions on your tax payment.
• 100% deductions can be availed if you donate your money to funds such as Prime Minister’s relief fund, National Defence Fund, National Illness Assistance Fund, and so on.
• 50% of deductions can be availed if there are donations made towards funds such as PM’s Draught relief fund, Rajiv Gandhi Foundation, etc.
e) Tax Deductions under Section 80TTA
Under this section, you are allowed to take deductions of up to Rs. 10,000 per year on the interest on the bank savings accounts.
So that’s all from my side, there are many deductions which you can avail yourself under Income tax, I shared with you some of them which are easy to avail by an individual.
Mr. Rahul Kumar Vishwakarma
Sage School of Commerce