Taxes are a necessary part of life to pay the government, But Majority of people not to prefer giving tax to the government a share of their earning.
The good news is that you may reduce your annual tax burden in a few entirely legal methods. These consist of credits, deductions, and sophisticated investing techniques. While some tax breaks are solely accessible to freelancers or small company owners, others are open to all taxpayers.
Here are the following ways through which you can reduce your income tax:-
Scholarship for education:
Any scholarship given to qualified students to assist with educational costs is free from income tax under section 10(16) of the Income Tax Act.
Amount obtained from shares or equities mutual funds:
If equity mutual funds or shares are sold after being held for one year or more, long-term capital gains up to Rs. 1 lakh are exempt from income tax.
Tax deduction for home loans:
You can receive a benefit of Rs. 1.5 lakhs on the principle amount and Rs. 2 lakhs on the interest paid as per section 24 if you use section 80C of the Income Tax Act to your advantage when arranging your house loan and lowering your taxable income.
Education Loan:
Section 80E of the Income Tax Act is applicable when taking out a loan for educational purposes. A student loan’s interest payment is not taxed. For this category, there is no specified ceiling.
Gifts to charities:
Section 80G of the Income Tax Act entitles you to a deduction for gifts made to specific relief funds and charitable organisations. However, not every contribution is eligible for a tax benefit under Section 80G. Tax deductions only apply to donations made to authorised funds.
Healthcare expenses for dependents who are disabled:
The fixed discount provided by this clause is unaffected by age or cost. For 40% disability, the maximum deduction from gross income is Rs. 75,000, and for 80% disability or above, the maximum deduction from total income is Rs. 1,25,000. Under Section 80DD, a complete deduction is permitted even if the expenses are less than the threshold.
Amount obtained from shares or equities mutual funds:
If equity mutual funds or shares are sold after being held for one year or more, long-term capital gains up to Rs. 1 lakh are exempt from income tax.
Hindu Undivided Families (HUFs) and additional income:
Regardless of the HUF’s residency status, HUFs are acknowledged as independent tax entities and are entitled to individual tax exemptions for each of its members as well as a baseline tax exemption of Rs. 2.50 lakh.
Interest from Savings Accounts:
Interest received on savings accounts is typically free from tax up to a limit of Rs. 10,000. The aggregate of all savings accounts is represented by this amount. Under section 80TTB, this ceiling is raised to Rs. 50,000 for older folks.
Welcome to How2invest.co , your reliable resource for information on starting a business, financing alternatives, and investing tactics. Learn useful information, professional guidance, and tools to support your business ambitions, obtain the appropriate financing, and increase your wealth via wise investments. Join us today to begin your path to financial success!
FAQs
Q1-What is the smallest amount of salaries that can be taxed?
Ans-As of the previous administration, Rs. 2.5 lakhs was the lower threshold for paying income tax on a salary. This is the starting point for someone under the age of 60. The lowest limit is Rs. 3 lakhs for those over 60; it is Rs. 5 lakhs for Super Senior Citizens. No matter the person’s age, the lowest limit under the new tax system is Rs. 2.5 lakhs.
Q2-What are the five categories of income?
Salary income, revenue from capital gains, profit or profits from a business or profession, income from real estate, and other sources of income are the five categories of income.
Q3-Can I invest money at a post office and avoid paying taxes?
Yes, investing money at a post office may help you avoid tax. Like a five-year fixed deposit, you may invest in a five-year time deposit at a post office. Postal time deposits provide better interest rates than fixed deposit tax-saving instruments.