Income Tax Department is a government agency that undertakes the direct collection of tax in India. All operations of the department are handled by the Central Board for Direct Taxes (CBDT). Income Tax Act of India passed in 1961 which handles all income tax provisions as well as any tax deductions that may be applicable. There have been many changes to the Income Tax law every year because of economic situations and inflation. For the current financial year 2019-20, all the resident whose annual income exceeds ₹ 2.5 Lakh per annum are applicable to file Income Tax Return (ITR). The highest amount of tax an individual could pay is 30% of their income plus cess at 4% if their income is more than ₹ 10 Lakh p.a. There is a myth that those whose income is more than ₹ 2.5 Lakh per annum can only file ITR or those who are eligible to pay tax, they have to file ITR but it is not true. Every citizen who is earning money can file ITR. ITR is a proof of your income only so if you are filing ITR every year, you are preparing your financial base for your future. The amount of tax applicable to you will depend on how much money you earn as income over the course of a financial year.
Who should pay Income Tax in India?
- Hindu Undivided Families (HUFs)
- Local Authorities
- Corporate firms
- Body of Individuals (BOIs)
- Artificial Judicial Persons
- Association of Persons (AOPs)
Here we discuss some important deductions under the Income Tax Act 1961 so that you can save your taxes.
Under Section 80RRB:
Deductions with respect to income by way of royalties or patents can be claimed under this section. Income tax can be saved on an amount up to ₹ 3 Lakh for patents registered under the Patents Act, 1970.
Under Section: 80TTA/80TTB:
The interest on savings accounts, post office or co-operative societies are tax-free under the Section 80TTA and the limit is ₹ 10,000.
Senior citizens (those aged 60 years and above) can claim maximum deduction of ₹ 50,000 under the Section 80TTB. The deduction can be claimed on the interest earned from various sources such as savings account, fixed deposits, senior citizen savings account and so on.
Under Section 10(13):
You can claim HRA to save tax on your house rent. This is applicable only if you do not own any house near to your office. You must be living in rented space and should receive rent receipts from the house owner. You have to submit PAN card copy of your landlord if you are paying more than ₹ 100,000 annual rent. If HRA forms part of your salary, then the minimum of the following three is available as exemption:
The actual HRA received from your employer
The actual rent paid by you for the house, minus 10 percent of your salary (including your allowances)
50 percent of your basic salary (for a metro) or 40 percent of your basic salary (for non-metro)
Under Section 10(1):
Any income derived from Agriculture land is tax-free in India under section 10(1). The agriculture income can be:
Any rent or revenue derived from land
Income from agriculture products
Income from a farm building
Under Section 10(2):
If you invest in the share market (Equity or Mutual Funds) then you can make your profits 100% non-taxable up to ₹ 100,000 only then if you hold that stock for one year (Long Term Capital Gain) and after that, you have to pay 10% Capital Tax gain.
Under Section 10(5):
Leave Travel Allowance (LTA) is tax-free under Section 10(5) of the Income Tax Act, 1961 as LTA is paid by the employer for employee’s and his family’s travel. It is provided for two journeys in a period of 4 years.
Under Section 10(D):
If you hold a life insurance policy issued prior to 1 April 2012: Any proceeds received on account of maturity/surrender of an insurance policy was exempt from tax only if the premium paid did not exceed 20% of the sum assured. For example, if the annual premium is ₹ 10,000, to qualify for the exemption, the minimum sum assured under the policy was required to be ₹ 50,000.
If the sum assured was less than the said value, the entire maturity proceeds would be taxable.
For policies issued after 1 April 2012: The premium paid in respect of such policies should not exceed 10% of the sum assured. In case you bought the policy after 1 April 2013 and the policy covers disability (as referred u/s 80U) or specified disease (as per section 80DDB), then in order to claim the deduction, the premium should not exceed 15% of the sum assured.
Under Section 56(2):
The gifts received (through cash/cheque/gifts) on marriage are totally tax-free under section 56(2).
Now you have lots of options where you can save your tax, no need to worry now. You have ample of time to think and for investment. Take your time and also consult with your financial consultant and always remember, file your ITR with correct details (You name, PAN number, Address). Mention all the details cleanly and correctly so if you are eligible for the tax refund, your refund can reach to you timely.