Several changes have been introduced to the Tax system in India.
Due to this, citizens of the country are at a loss about how to find out different measures that can cut down on the losses brought forth by heightened by additional tax deductions.
Being aware of how your investments can create an impact on your taxes and savings can help you save a lot more money than you can imagine.
For those who aren’t aware of tax deductions yet – these are deductions made to your annual income once the amount falls under the given tax bracket.
Income tax deductions can bring down your tax liability.
Often considered a benefit, these can help you save some money.
Tax Exemption & Deduction – What’s the Difference?
To make it easier on the citizens, the Government of India often introduces provisions that can help you avail such benefits.
For example, Investments made in The Pradhan Mantri Sukanya Samriddhi Yojana are completely tax exempted.
So, how do Tax Deductions help?
Tax deductions help by deducting a significant amount of money from your taxable income in order to save tax.
While making a claim for an income tax deduction, it brings down the amount of your income subjected to payment of taxes.
This reduced taxable income in turn allows you to invest in other areas.
There are 19 Types of Tax Deductions in India. They are :-
- Public Provident Fund (PPF)
- Life Insurance Premiums
- National Saving Certificate (NSC)
- Fixed Deposits
- Senior Citizen Savings Scheme (SCSS)
- Post Office Time Deposit (POTD)
- Unit-linked Insurance Plans (ULIP)
- Home Loan EMIs
- Mutual Funds
- Stamp Duty and Registration Charges for a Home
- Retirement Savings Plan
- Tuition Fees
- Medical Insurance Premium
- Infrastructure Bonds
- Charitable Contribution
- Treatment of Disabled Dependents
- Interest Paid on Education Loan
- Preventive Health Check-ups
- House Rent Allowance Deduction
Now let’s look at the top 5 tips that you need to be aware of for a better Tax-Planning strategy this financial year!
Invest The Amount You Save During Tax Deductions
Most people think about their tax deductions as the month of March closes in on them.
What they forget, is about reinvesting the amount of money they might save during these deductions.
A well rounded investment strategy would include this is a pivotal plan – calculate how much you can save from these deductions and invest most (if not all) into another tax-free savings plan.
Winning From The Losses
Rethink Your Investments Methods
Take all small tax advantages you might come across and convert them into long-term potential investments.
This is a must.
Make a move away from possibly risky investments like international stocks or other volatile assets and put them into a tax-saving scheme.
This way not only do you enjoy the returns but also need not worry about including them in your taxes.
While doing this, also make sure you shift out less taxed assets into your taxable accounts for better growth.
Charity Always Starts From You
Look forward to investing in charitable funds.
Not only this a tax exempted field in India but also more importantly a noble cause.
Understand What’s Capital Gain & Save On Tax
In this financial year, India saw several changes, starting with demonitization and moving on to the introduction of GST rates from July 1st, 2017.
Given the changes, we as Indians always fall behind on tax planning as we fail to make the most of our tax systems.
As we have elaborated on this article, there are provisions to make savings even as a tax paying citizen – all you need to do is to plan ahead and make sure you have proof of all the right documents that can help you do so.
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