Last-minute tax filings, investment declarations, and the looming fear of high TDS – we have all been there! Investment declaration became a norm in the FY 2018-19 when companies started encouraging employees to declare their investments to avoid TDS on the employee’s full salary.
Many experts believe that declaring your investments at the beginning of the year because the amount of investment you make then determines how much money you save instead of putting in taxes.
If declared at the beginning, the employer will calculate the tax accordingly that is to be deducted at the source. While this will reduce the salary for the full year, the tax which is now spread across months will also reduce.
Most of these tax-saving processes fall under section 80c of the Income Tax act, capped at INR 1.5 lakhs.
Now that we have established that investment declaration is important, let’s explore the different trajectories that will help those on payroll be less overwhelmed with paperwork.
1. House Rent Allowance (HRA)
One of the most common investment declarations, HRA is available in the first part of form 12B. If you need to claim your HRA, keep the following information handy:
- The rental agreement, complete with the name and address of the landlord and the rent that is to be paid.
- In case the monthly rent goes beyond INR 1 lakh, you also need to produce your landlord’s PAN Card.
- Rent receipts in the form of account statements or other proofs that show a monthly deduction of the rental amount.
2. Mediclaim Premium
Even if your company is taking care of your medical insurance, chances are that you might be paying a medical premium for your family members. Premium towards health insurance is a qualified tax benefit under section 80 of the Income Tax Act.
The maximum deduction offered in this case is a maximum of INR 25,000 per annum, considering that the age of the insured person is below 60 years. In the case of senior citizens, the benefit availed in INR 50,000 per year.
3. Housing Loans
If you have home loans, then all you have to do is ask your loan lender to give you the provisional statement, showing the break-up of your principle and the interest component of your loan amount. This EMI break-up will allow you to declare your tax benefit to your employer under the section 80c benefit.
4. Leave Travel Allowance (LTA)
This benefit is allowed for employees with a salary structure that includes LTA. The declaration limit will be provided by the employer or it can be based on the actual travel cost, whichever is deemed less.
In order to gain this benefit, the employees should be able to produce the tickets for domestic travel as well as their boarding pass in case of flights. It is important to note that this is applicable only for domestic travel. With the covid situation preceding the plans, this exemption has hardly been availed lately.
Investments in mutual funds, life insurance, public provident fund, NSC, Sukanya Samriddhi Scheme, and 5-year tax-saving fixed deposit are qualified for deduction of total income under section 80C of the Income Tax Act. This also works well with parents for school-going children as their tuition fees can also be declared under Section 80C.
6. National Pension Scheme
On the off chance that you have put resources into NPS all alone, i.e., outside compensation, pronounce the sum that you wish to contribute this FY inside the greatest Rs 50,000 considered tax break reason under area 80CCD (1B).
7. Income Via NRE Account Interest
Non-occupant Indians have NRE accounts in India. They acquire an interest in the collected sum and the sum saved as a fixed store. Because of the liberal idea of the Indian government towards the NRIs, such a sum isn’t available. The interest sum is known as tax-exempt pay.
8. Additional Contribution to National Pension Scheme
Normally, commitments to the National Pension Scheme fall under Section 80C, where there is a restriction of INR 150000. Be that as it may, you can pick to contribute INR 50000 more in the National Pension Scheme, as this sum will be tax-exempt.
Scholarship sum is tax-exempt under Section 10(16). There are no restrictions in such a situation as the whole sum obtained under the private or public grant is tax-exempt.
10. Sum Received From Sold Shares or Sold Equity Mutual Funds
On the off chance that the measure of long haul capital increase is more than INR 1 lakh, at that point a 10% expense is pertinent.
11. Sum Received as Dividends on Shares or Equity Mutual Funds
Such a sum is tax-exempt.
12. HUF and Extra Income
On the off chance that you are somebody who procures optional pay separated from your essential compensation pay, at that point you can set aside cash paid as a duty for the pay separated from pay.
For instance, cash acquired from outsourcing will comprise optional pay. You should open a different HUF to represent the auxiliary pay. And afterward, you can contribute that sum under area 80C to profit tax reductions for that sum.
13. Sum Received Through Inheritance
The sum got through legacy as a will isn’t available in India. Consequently, the sum you get according to a will not be taxed in the country.
14. Wedding Gift
A wedding is an astounding event for the whole family, particularly for the individual getting hitched. In India, it is a humongous occasion where the lady of the hour and husband to be are showered with endowments.
Under Section 56(2), such endowments are non-available. Be it a blessing, money, or check, endowments got on getting hitched don’t draw in charge. Such endowments can be from your family members or companions.
15. The sum from Provident Funds
Interest in the opportune asset isn’t available. Sit tight for a very long time before you pull out the sum from your Provident Fund.
16. Credit for Education Purposes
This goes under area 80E of the Income Tax Act. The interest sum paid against training credit isn’t available. There is no predetermined cutoff for such a classification.
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17. Costs to treat Disabled Dependent
Such derivations are a piece of Section 80DD. Fixed derivations of INR 75000 are apportioned for an individual with 40 to 80% inability and Rs. 125000 for over 80% in capacity. Such costs ought to be for treating a sickness, restoration, or preparing. You should outfit an authentication of incapacity to profit from the advantage of such derivation.
FAQs On Investment Declaration
1. Which are the various sorts of pay characterizations?
Pay can be grouped in the accompanying five different ways: pay from pay, pay from capital gains, benefit or gains from business or calling, house property pay, and pay created from different sources.
2. Would I be able to save charge for the exceptional paid protection?
Indeed, you can set aside cash paid as a duty by paying for life coverage and health care coverage. Such arrangements are set up to urge individuals to profit by buying protection approaches identified with life and wellbeing.
3. Do I need to stress over getting a good deal on tax if my yearly pay is not as much as INR 250000?
Assessment sections may change on a yearly premise. Assessment piece as of February 2020 absolves the assortment of duty sum from an individual procuring not as much as INR 250000.
Nonetheless, this doesn’t imply that the individual ought not to document the charge. Documenting personal expense forms is a decent propensity and one should do so regardless of whether the yearly pay isn’t available.
4. What are ULIPs?
Unit Linked Insurance Plans are prevalently alluded to as ULIPs. They are protection plots that have a connection with the offer market. You can save the burden and get an opportunity to watch the cash develop.
5. Would I be able to put resources into common assets to save charge?
Indeed, shared assets can likewise be seen as a personal assessment saving instrument. Make a point to confirm if the shared assets are charge savers. Value Linked Saving Schemes are useful with regards to putting resources into common assets with the goal of saving duty.
6. Is there any assessment saving instrument identified with the mail center?
Indeed, there is a duty-saving instrument identified with the mail center. Similarly, as you can put resources into a five-year fixed store, you can likewise put resources into a period store of five years with a mail center. Contrasted with a fixed store charge saver instrument, the financing costs on a mailing station time store are higher.