10 Useful Income Tax Deductions_Banner_WC
10 Useful Income Tax Deductions _WC
Income tax is a significant source of revenue for the government, and it is essential in funding various public welfare benefits, infrastructure development, and providing citizens with essential services. Individuals are encouraged to save and invest more as a result of the various deductions and exemptions available under the Indian Income Tax Act of 1961, which contributes to the country's overall economic growth. The income tax is a valuable tool for funding government spending, increasing transparency, reducing inequality, and cultivating unity. It is an essential component of the country's overall development as well as a healthy and sustainable economy.
Individuals, Hindu Undivided Families (HUFs), companies, and firms are all taxed in India. In India, the Indian Income Tax Act of 1961 governs income tax rules and regulations.
Different tax slabs apply to different income levels, with tax rates ranging from 5% to 30%. Individuals earning up to Rs.2.5 Lakh per year are tax-free, while those earning Rs.2.5 Lakh to Rs.5 Lakh are taxed at a rate of 5%.
10 Effective Income Tax Deductions to Reduce Taxes in (23-24)
The Income Tax Act provides several tax deductions that can help you reduce your taxable income and save money on taxes. Here are ten useful income tax deductions for the fiscal year 2023-2024:
This section allows you to deduct up to Rs.1.5 Lakh from your income for investments in specified instruments such as Public Provident Fund (PPF), Employees Provident Fund (EPF), and National Savings Certificate (NSC), among others.
This section allows you to claim deductions of up to Rs.1.5 Lakh for National Pension System contributions (NPS).
This section allows you to deduct medical insurance premiums paid for yourself, your spouse, your dependent children, and your parents. This section allows for a maximum deduction of Rs.50,000 for self, spouse, and children, and Rs.50,000 for senior citizens.
This section allows you to deduct the interest paid on student loans for higher education. There is no cap on the number of deductions you can claim under this section.
This section allows you to deduct charitable contributions made to specific organisations. Depending on the type of institution, the maximum deduction under this section ranges between 50% and 100% of the donated amount.
Under this section, you can deduct up to Rs.10,000 for interest earned on savings accounts.
If you do not receive HRA as part of your salary, you can claim deductions for rent paid under this section. This section allows for a maximum deduction of Rs.60,000.
This section allows you to deduct royalties received from patents. This section allows for a maximum deduction of Rs.3 Lakh.
This section allows you to deduct expenses for people with disabilities. The maximum deduction under this section is Rs.75,000 for a disabled person and Rs.1.25 Lakh for a severely disabled person.
Section 24 provides substantial income tax benefits on home loans. If you have a home loan, you can deduct the interest paid on a self-occupied property loan in this section. The maximum deduction for a housing loan under this section is Rs.2 Lakh.
How to Calculate Income Tax
Income tax is calculated in accordance with the Income Tax Act of 1961 and the Central Board of Direct Taxes' rules and regulations (CBDT). Here's an overview of how income tax is calculated in India:
1.Determine Your Taxable Income
All sources of income, such as salary, business or professional income, capital gains, and other sources, are included in your taxable income. Income Tax Deductions under Sections 80C, 80D, and other sections of the Income Tax Act can help you reduce your taxable income.
2.Determine Your Tax Slab
The Indian tax system is divided into several tax slabs, and the tax rate varies according to your taxable income. The tax slabs for FY 2023-24 are as follows:
Up to Rs.3 Lakh: NIL
Rs.3 Lakh to Rs.6 Lakh: 5%
Rs.6 Lakh to Rs.9 Lakh: 10%
Rs.9 Lakh to Rs.12 Lakh: 15%
Rs.12 Lakh to Rs.15 Lakh: 20%
Above Rs.15 Lakh: 30%
3.Calculate Your Tax Liability
To calculate your tax liability, multiply your taxable income by the applicable tax rate, then subtract any tax credits or rebates that you qualify for. You could also use the income tax calculator online.
4.File Your Tax Return
Finally, by the due date, you must file your income tax return with the Indian government. This is something you can do online.
Here are the steps to filing your income tax in India:
Step 1: To calculate your taxable income, you will need to gather all of your income-related documents, such as salary slips, Form 16 (applicable for employees), and bank statements.
Step 2: All sources of income, such as salary, business or professional income, capital gains, and other sources, are included in your taxable income. Deductions under Sections 80C, 80D, and other sections of the Income Tax Act can be used to reduce your taxable income.
Step 3: Calculate your tax liability using the Indian government's tax slabs and rates. You can get help from online tax calculators.
Step 4: To file your tax return, you must first register on the Indian government's e-filing portal. To complete the registration process, you will need to provide your PAN (Permanent Account Number) and other personal information.
Step 5: After logging into the e-filing portal, you must complete the tax return form (ITR). The form will request details on your taxable income, deductions, and tax liability.
Step 6: After completing the form, you can preview your tax return to ensure that all of the information is correct. You can file your tax return if everything is in order.
Step 7: To avoid penalties and interest charges, you must pay any taxes owed before the due date.
Step 8: For future reference, keep a copy of your tax return and all supporting documents.
Also Read: How to File your ITR for Home Loan
How to Use an Income Tax Calculator
Using an income tax calculator is a straightforward process that can assist you in determining your tax liability. Here is how to use an income tax calculator:
Step 1: There are numerous free income tax calculators available online, but it is critical to select one that is dependable and accurate. Make a list of the calculators you want to use and go to their website.
Step 2: The income tax calculators will require you to enter personal information such as your name, age, gender, and PAN card number.
Step 3: The next step is to enter your income information, such as your salary, business or professional income, capital gains, and other sources of income.
Step 4: To reduce your taxable income, you can also claim tax deductions under Sections 80C, 80D, and other sections of the Income Tax Act.
Step 5: The income tax calculator will use the tax slabs and rates specified to calculate your tax liability.
Step 6: The income tax calculator will show you how much tax you owe and how much you will receive after taxes are deducted.
Step 7: The income tax calculator results can be saved for future use.
10 Useful Income Tax Deductions _RAC_WC