Introduction:
Taxes are an inevitable plot of everyone’s life story, regardless of whether you are a resident or a non-resident, every individual earning an income in India is subject to income tax either directly or indirectly. The income tax return in India would include your salary, pension, or your savings from which 4% of interest can be incurred. Even though taxes are essentially unavoidable, you can always choose to minimize their impact, which could be accomplished by filing the Income Tax Return every year.
Some of the latest deadlines for filing the income tax returns in India are delayed and extended from 31 July to 30 November 2020. The due date for tax return audits are also extended from 30 September 2020 to 31 October 2020. Ideally, maximizing deductions is the fundamental way of reducing the heavy burden of taxes on your shoulders regardless of whether you have invested your money, taken insurance, or made large amounts of loan payments.
Assessing what deductions you can claim is highly important as it helps you determine the conditions of deductions that are viable enough for you to claim. There many types of deductions underpayment and investments against which you can claim your deductions. However, a few of the most important ones are:
Make contributions towards Public Provident Fund:
Start making smarter investments by investing small segments of your savings beginning from the lowest price to reaching lakhs with an interest of 8% per annum. This makes the investments, the gains, and even the withdrawals of these funds completely tax-free.Make investments in NPS to get an additional tax deduction:
You can attain the maximum additional tax deductions by investing in NPS, which stands for National Pension Scheme. Investing up to ₹ 50,000 in the National Pension Scheme for all taxpayers, whether employed or self-employed, makes them eligible for additional tax deduction under the new Section 80CCD (1B) of the Income Tax Act.
This deduction is attained in addition to the ₹ 1.5 lakh limit allowed under Section 80C. This enables one to save some funds on their next tax bill. However, the taxpayers must duly note that under this scheme, the investors must purchase an annuity plan with 40% of the corpus at maturity so that the remaining 60% can be withdrawn.
The money you invest in the employer’s Provident Funds, the interest accumulated, and the amount withdrawn after a while remains exempt from income tax.
Secure insurance by creating an emergency fund:
It is advisable to secure insurance depending on your needs wherein you can opt for a single premium plan or policies that enable you to make one-time payments covering up to 60 years of age. Investments that are made towards health insurance can easily claim up to Rs 25,000 under section 80D of the Income Tax Act. Deductions up to 1.5 lakh are eligible for LIC and other private companies for the payment of life insurance.
Companies give in health insurance cover which becomes a necessity bringing in the need to opt for a family floater health plan insurance, wherein the coverage is shared amongst the family members.
Home loan & House Rent Allowance:
Having a home loan to repay can make you eligible for a deduction up to Rs. 2 lakh for the interest on loan payment under Section 24 given for a self-occupied house.
You can claim a deduction up to 1.50 lakh under section 80C against the principal repayment. Whereas, for the second house owned you can claim the entire amount of interest paid on the loan as your deduction. For rented accommodation, a tax deduction against the rent paid can be claimed only if House Rent Allowance is an incentive covered by the salary.
FAQs on Income Tax Returns:
It is mandatory to file the income tax return by the allotted deadline to avoid penalties. Some of the latest deadlines for filing the income tax returns in India are delayed and extended from 31 July to 30 November 2020.
Yes, you can file your income tax return voluntarily regardless of your income not crossing the limit of the income tax slab.
Individuals, Hindu Undivided Family (HUF), Association of Persons (AOP) and Body of Individuals (BOI), other firms and companies are mandated to file an income tax return. Although, each tax slab has different tax rates. However, for income tax in India, there are four tax brackets:
- Income earners of up to 2.5 lakhs
- Income earners of between 2.5 lakhs and 5 lakhs
- Income earners of between 5 lakhs and 10 lakhs
- Those earning more than 10 lakhs
There is no such requirement to attach any documents with the income tax return. However, it would be better to retain documents to produce before any authority in case it is required.
Yes, disclosing all sources of income including the income exempted from income tax is mandatory.
