Tax Planning for Salaried Individuals
- 4 Feb 2019
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Every taxpayer raised a question in their mind “How to do tax planning for the previous year?” Taxpayers are generally afraid of Income Tax and tax planning. But there is a difference between Tax planning and Tax evasion. In Simple terms, Tax planning can be defined as the analysis of the assesses financial in order to calculate the tax in the most effective and efficient manner. Tax Planning is legal which allow the taxpayer to make use of his various deductions & exemptions to minimise the Tax Liability.
Tax evasion is an act where a person wilfully/deliberately avoiding the tax payment. Non-payment of tax by not reporting the income in Income tax return also attract Tax Evasion.
Any person who earns an amount greater than or equal to Basic exemption limit of Rs 2.5 lakhs has to file Income Tax Return as per IT Laws.
With the year-end, salaried individuals are in berserk about taxes they must shell out for the financial year. Salaried Individuals working in an organised sector, filed their returns without giving a thought on tax planning due to the fact as TDS (tax deducted at sources) is already deducted as per their Income following with their Form 16. But it’s a saying “Money saved is money earned”.
The following things should be kept in mind before the filing of returns:-
•Standard Deduction:- The finance ministry has allowed a standard deduction of Rs. 40000/- in Budget 2018 which would replace the existing transport allowance of Rs 1600 p.m (19200/-) and Medical Allowance of Rs. 15000/- p.a. The reintroduction of Standard deduction will give a net additional benefit of Rs. 5800/-
•House Rent Allowance:- Individual with a rented house can avail this deduction. If a person receiving HRA but did not live in Rented House then the total amount would be taxable under the head Salary Income. HRA is either exempted partially or completely as calculated with Income Tax laws.
•Deductions:- All the deductions should be kept in mind while calculating the Total Income. Deductions can reduce your Gross Total Income which will reduce your Income Tax Liability.
•Home Loan: Section 24 and 80EE provides a deduction of 2lakhs and 50000/- per financial year respectively which can be availed by the individual for taking the deduction of “Interest on loans”. Deduction of 50000/- under section 80EE is over and above the deduction specified under section 24 of Income Tax Act.
•Donations under Section 80G: To promote the charity for poor and needy, the govt. has allowed individuals to claim the donation as a deduction under section 80G. Donation made to recognised Charity Institutions is eligible to be claimed as a deduction. A Receipt is issued by the Charitable institution to donors mentioning the details of Donors, name of the trust, Amount donated and Registration no. of the Institution given by IT Dept u/s 80G.
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