India celebrates its 70th Republic Day on January 26, 2019. The country honors this date as it is on this day in 1950 that the Constitution of India came into force replacing the Government of India Act (1935) as the governing document of India.
In order to pay a tribute to the rich diversity and heritage of the country, the Republic Day parade comprises a lustrous display of art and culture from various states in India before the President of India. This year’s Republic Day will also include a stunning display of woman power. An all-women Assam Rifles contingent will lead the parade with a woman officer performing bike stunts on Rajpath.
As India celebrates the National Holiday, it is also time that we begin planning our taxes for the year. We, at IndiaInfoline, through our tax planning series, help you make some wise moves when it comes to tax saving, giving you greater income in hand.
Tax Planning under Section 80C
The first thing an Indian taxpayer must know about is Section 80C. Among the various exemptions that the Income Tax Act offers to Indian taxpayers, Section 80C is one of the most popularly known exemption. This particular section alone exempts tax up to an outer limit of Rs1.50 lakh per financial year on a series of contributions.
Broadly, there are two types of contributions that are eligible for exemption under Section 80C. First, there are specific investments such as Public Provident Fund (PPF) and equity-linked savings scheme (ELSS), where you can invest for long-term growth and get tax benefits.
Second, there are also select payments such as premium on life insurance and tuition fees for your children that are eligible for exemption under Section 80C. Know more about these investments.
Understanding the power of ELSS
Equity-linked savings schemes, or ELSS funds as they are popularly known, are mutual funds that primarily invest and calculate their returns from the equity markets.
They are mostly open-ended equity funds, meaning an investor can enter the fund at any time, that are classified as tax-saving instruments under Section 80C of the Income Tax Act. ELSS funds allow the taxpayer to save up to Rs1,50,000 on tax annually and are a better option for investors who are new to the market. Read more about ELSS funds.
Get the most out of your HRA and second home
A house can be a fairly important tool for saving tax in India as you can avail attractive tax exemptions. This is irrespective of whether you are staying on rent and claiming HRA or if you have bought a property and paying EMI. Both can be structured in such a way so as to be extremely tax-efficient.
Additionally, if you have just purchased a second property, it can give you more benefits than the rental income. Want to save tax? Read more about both these tax benefits.
Managing taxes if you’re changing jobs
People change jobs for a variety of reasons, ranging from higher income to higher perks to a better designation. In the midst of all the excitement pertaining to your job change, you must not ignore the all-important tax angle.
Read the five-point guide for managing tax when you change jobs.
If you’re self-employed or a seasonal worker, this is what you should know about taxes
Ideally, self-employed professionals are required to maintain elaborate books of accounts that show their income statement, balance sheet, cash register, etc. A tax audit is mandatory if your revenues exceed Rs50 lakh during a given financial year.
At the time of filing the ITR-4, which self-employed persons use to file their tax returns, you are allowed to claim all legitimate business expenses and you only have to pay the applicable rate of tax on the net profits for the year. Remember, that while smaller expenses can be paid by cash, all large items of expenditure above Rs10,000 must be paid through banking channels only. Read more
Finally, if you are a senior citizen…
When it comes to payment of income tax, the government has defined special concessions for people above the age of 60 to reduce their tax burden.
Effective the Union Budget of 2018-19, the interest exemption limit on deposits has been increased from Rs10,000 to Rs50,000 per annum.
There are a plethora of benefits that the government has made available for senior citizens so that they can enjoy a peaceful and hassle-free retirement. Know how to get full advantage of these benefits.