If you are a salaried employee or a self-employed professional, you might be wondеring how to reduce your tax liability and save money during ITR filing. One of the ways to do that is to claim dеductions undеr various sеctions of the Income Tax Act, 1961. Dеductions arе amounts that you can subtract from your gross incomе to arrive at your taxablе incomе. By claiming dеductions, you can lower your taxablе incomе and pay lеss tax. In this article, we will еxplain how to claim dеductions and savе tax while filing your incomе tax rеturn (ITR). Wе will also provide some tips and еxamplеs to help you maximizе your dеductions and minimizе your tax burdеn.
Tips to Save Tax and Claim Deduction
Here are some beneficial tips to be followed:
● Section 80C Tax Saving Investment Options
Section 80C allows for deducting life insurance premiums from taxable income, resulting in tax savings. Public Provident Fund (PPF), National Savings Certificates (NSC), National Pension System (NPS), Sukanya Samriddhi, and your child’s tuition expenses are some of the additional tax-saving choices covered by this section. However, the highest amount that may be claimed as a deduction from taxable income under this clause is 1.5 lakhs.
● Increase Deductions
Aside from Section 80C, the Income Tax Act has numerous additional provisions that enable deductions. Make sure to investigate and take advantage of these tax breaks. For example, under Section 80D, you may deduct health insurance premiums paid for yourself, your spouse, your children, or your parents. In addition, Section 24(b) enables deductions for house loan interest. You may drastically lower your taxable income and save on taxes by correctly finding and applying these deductions.
● Keep Current on Tax Law Changes
Tax rules and regulations vary from year to year. Keeping up to speed on government revisions or new laws is critical. You can make informed judgments and plan your taxes if you keep yourself informed. Regularly examine reputable tax information sources, such as the Income Tax Department’s website, to remain up to speed on the latest changes.
● Maintain Accurate Documentation
When claiming deductions, it is essential to have accurate income tax filing documents. Keep copies of investment statements, receipts, certificates, and other pertinent documentation. This will assist you in supporting your claims throughout the ITR filing procedure. In the event of a tax audit or investigation, having precise and well-organized paperwork can guarantee a smooth process and prevent any possible fines.
● Make Prudent Investments
Investments must be made within the time limitations provided to obtain deductions under different sections. To claim Section 80C deductions, for example, investments must be made before the end of the fiscal year (typically March 31st). Plan your assets to avoid missing out on any potential deductions.
● Make Use of Exemptions and Allowances
Aside from deductions, the Income Tax Act includes some exclusions and allowances. For example, depending on the circumstances, House Rent Allowance (HRA) earned as part of your payment may be free from tax in position or entirely. You may lower your taxable income by recognizing and using these exemptions and allowances.
● ITR Must Be Filed on Time
To avoid penalties for late filing of ITR, submit your ITR on time. Filing your ITR before the due date (typically July 31st) allows you to analyze your tax obligation, claim deductions, and correct any mistakes or anomalies. Late filing might result in unnecessary financial losses and stress.
● Seek Professional Help
If you find tax planning and ITR filing difficult or have a more complicated tax position, seek expert help. Tax advisors or chartered accountants may give tailored advice depending on your situation. They can assist you in maximizing your tax savings while remaining in conformity with the tax regulations.
● Make a Charity Contribution
Donations to some relief funds and charity organizations are deductible under Section 80G. However, donations of food, medications, and other non-cash goods are not tax deductible.
This article has given you a clear idea of how to claim dеductions and savе tax while filing your ITR. Rеmеmbеr, dеductions arе not an onе-sizе-fits-all solution. You nееd to choosе thе onеs that suit your incomе, еxpеnsеs and financial goals. You also nееd to kееp propеr rеcords and proofs of your dеductions to avoid any scrutiny or pеnalty from thе tax authoritiеs. By following thеsе stеps, you can optimizе your tax planning and savе monеy in the long run.