Friday, January 3, 2014

Are You Utilizing All Your Tax Saving Options?


It is that time of the year when everyone is starting to talk about Income Tax and how it is eating into their take home salary. Most of the Salaried Individuals in our country do not put too much thought into their Taxes. They just let their employer deduct "TDS" and are content to live with whatever take home salary they get. Did you know that the Government gives us numerous options using which we can legally reduce our tax liability?

The purpose of this article is to outline those options.

Do I Have To Pay Tax on my ENTIRE ANNUAL INCOME?

NO. NOT AT ALL...

Yes, you read it right. Not all your income is taxed. The government has many provisions by which you can reduce your Taxable Income which in turn reduces your tax liability.

What are these Provisions?

These provisions fall into two categories: Deductions and Exemptions

Deductions From Income:

As per our tax laws, there are certain deductions that are allowed on the income earned by an individual. These amounts can be subtracted while arriving upon the net taxable salary of an individual. For ex: If your total salary is 5 lakhs and the deductions that we are going to cover in this section total up to 1.5 lakhs, your net taxable income will be only 3.5 lakhs.

Those Deductions are:

1. House Rent Allowance or HRA
2. Leave Travel Allowance or LTA
3. Medical Allowance
4. Transportation Allowance
5. Interest Paid on Housing Loan

Exemptions From Income:

Just like the various deductions that we covered in the previous section, the Indian Tax Laws allow many exemptions that help the tax payer reduce his tax liability. These exemptions are categorized as sections with numbers followed by alphabets to help us identify them easily.

Those Exemptions are:

1. Section 80C - Exemptions for Qualified Investments
2. Section 80D - Exemptions for Medical Insurance
3. Section 80DD - Medical Treatment of a Physically Disabled Dependent
4. Section 80DDB - Medical Treatment of Self/Dependents for Major Diseases:
5. Section 80E - Exemption for Education Loan Repayment
6. Section 80U - Exemption for Disabled Tax Payers:
7. Section 80G - Exemptions for Charitable Donations
8. Section 80CCG - Exemption for Investing in Rajiv Gandhi Equity Savings Scheme "RGESS"
9. Section 80TTA - Exemption for Interest Income Earned from Savings Accounts
10. Section 80GG - Exemption for Individuals Living in Rented Houses
11. Section 80GGC - Donations Made to Political Parties

As you can see, there are numerous Deductions and Exemptions that you can use to reduce your Income Tax Liability every year. I recently published a book that clearly explains all of these deductions and exemptions in great detail. The book also has a "Life Stage Based Tax Saving Portfolio" that can help you retire as a "CROREPATI".

Click Here for details on how to purchase the book

Happy Tax Saving and Best Wishes on retiring as a CROREPATI!!!

10 comments:

  1. Reference: http://anandvijayakumar.blogspot.com

    Hello I am here to know how to pay income tax for Online Earning, my sources of Earning are

    1. Google Adsense
    2. Infolinks

    Please help me.

    ReplyDelete
    Replies
    1. Bikky - The income you earn via infolinks and google should be added to any other income you may earn during the year (if any) and then you will pay income tax based on which slab you fall into.

      Anand

      Delete
  2. Hi Anand, I have a query on LTA claim. My company pays the LTA amount as part of CTC in advance to me. If there is no LTA claim from me, the entire amount will be paid to me by making it as a taxable income. If I submit the travel bills, it re-reimburse me by making the claim amount as Non-taxable. I am planning a travel in March'14. I want to submit the bills in April'14 or during the next FY, to be counted as a 1st travel of the 2014-2017 block and the tax exemption. Please advise.

    ReplyDelete
    Replies
    1. Any travel that happens after Jan 1st 2014 will be considered as the 1st travel of the 2014-17 block. The claim however has to happen based on which financial year your travel falls. If you travel before March 31st you must claim it in the financial year tat will end on March 31st. If you travel after April 1st you can claim it in the next financial year.

      Delete
  3. Can i show my income from google adsesne under section 44AD of income tax
    Sudarshan

    ReplyDelete
    Replies
    1. No, I dont think so. Thats for businesses. Adsense will come under - Income from other sources

      Delete
  4. Under which section can I claim deduction for term insurance plan? Can i claim it under section 80d?

    ReplyDelete
    Replies
    1. Its section 80C. Check my book on Indian income tax for info on what can be claimed under what section.,

      See here: http://anandvijayakumar.blogspot.sg/p/books-by-this-blog-author.html

      Delete
  5. I am a freelance software developer. I develop applications for customers from India and outside India. Do these to be considered as services or products?. Should i add any tax for these services or products for customers? Or should i file income tax return only? or both? My customers can be individuals or companies or marketing teams.

    ReplyDelete

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