Managing your finances and understanding the taxation system can be a difficult for most taxpayers. And as the financial year ends, it is important that you take steps to work out the tax you need to pay. Similarly, it is important that you make use of all the available options so that that you save on the payable tax as much as you can. Ask yourself these questions and the process should become simple.

Do I Need an Tax Accountant?

Many taxpayers are wary of relying on a Chartered Accountant. And you might be concerned that you will have to divulge the exact status of your finances. However, there are many advantages of working with one.

  1. Clarity of the taxation system– Account can help you understand complicated tax laws and regulations and update you with any changes in tax policies for the filing year.
  2. Accuracy– A qualified CA can help you follow right procedure and help you disclose your  income, expenditures, assets, investments and other details accurately. Any errors in your return can result in penalties being levied on you. Further, you might not be able to get the returns ready in time.
  3. Detailed Information– CA can advise you on all the tax saving strategies such tax-savings investments, deductions and exemptions applicable to you along with the provisions of Section 80 of the Income Tax Act.

However, it is possible that you have only a limited income and are not likely incur a large tax. If this is so, you need not hire a professional to help you. Also, if you are well-versed with the use of computers and can e-file your returns, you may not need a CA.

Do I Need to Sell any Investments?

You can have invested in different channels like for example, stocks or fixed property. Each investment earns you capital gains depending on the the time frame for which you hold them. In case of stocks, you have to hold them for a minimum of one year. If you liquidate these assets within this time, any profits you make can be added to your income. You will be required to pay a short-term capital gains tax at 15%. However, any long-term capital gains you earn on these investments are not taxable. On the flip side, you can also report your losses and these will be deducted from your income.

In case of fixed property, this time limit is 3 years. If you sell within this time, you will have to report short-term capital gains. But, if you hold your assets for longer, you have to report long-term capital gains and pay your taxes accordingly.

Should I Contribute More to My Retirement Funds?

The best time to begin planning for your retirement is when you earn your first income. The sooner you begin, you will be able to accumulate adequate funds to see you through your retirement years. Under Section 80C of the Income Tax Act, you can invest up to ₹1.5lacs in various investment options and these are deductible from your taxable income. Choose from options like Public Provident Funds, ELSS Mutual Funds, Bank FDs, Senior Citizen Saving Schemes, Rajiv Gandhi Equity Saving Schemes, Voluntary Provident Funds, New Pension Schemes, National Savings Certificates, Unit Linked Investment Plans, and Insurance Plans.

Are There Charitable Contributions I Haven’t Made Yet?

Making donations to various charitable institutions can allow you to deduct that amount from your taxable income. 50% to 100% of the donations you make are deductible depending on the institution where you’re donating. However, there are limitations to the percentage of your income you can donate. You must also donate only to a registered trusts.

Am I Overlooking any Deductions?

There are various deductions you can claim against your income.

  1. Capital losses–If you have incurred any losses when selling off your fixed assets, you can offset these losses against the gains in other fixed assets sales. You must also remember that if you incur losses on long term and short term assets, you can balance them against gains on short term profits.
  2. Rent–If you live in a rented home, you can claim a deduction of up to ₹2,000 or 25% of your total income, whichever amount is lower.
  3. Medical treatment for particular illnesses–Section 80DDB allows you to claim a deduction of ₹40,000 on your total income for the treatment of specific diseases. If you are above 60 years of age, you can claim deductions of ₹60,000. You will need to submit a Form 10-1 from your medical practitioner as proof. Further, you will have to prove that you don’t have receive insurance support for your ailment.
  4. Disability–Under Section 80U, if you have a disability, you can claim deductions of up to ₹1lac. However, you will need the necessary certification from a registered medical institution.
  5. Interest on Educational Loan– You could have taken loans for the education or vocational training for your spouse, children or any other individuals under your legal guardianship. Under Section 80E, you can deduct the interest from your taxable income.
  6. Interest on a Second Home Loan–You might have bought a second residence by taking a second home loan. Thus, the interest you pay on this loan is completely deductible. The law assumes that you will be renting out the second property. Accordingly, the rent you receive is taxable income.
  7. Interest on First Home Loan–You might have taken a loan to pay for a home that is not ready for possession. In this case, you can claim deductions on the rent you pay for your rental accommodation. You can also claim tax benefits on the principal you repay and the interest on the loan. These benefits are no longer valid when you get possession of the house. However, if you choose to rent out the house after possession, you will have to pay income tax on the rent you receive.
  8. Home Repairs–If you need to make repairs on your home or conduct any reconstruction, you can claim the costs as deductions up to ₹30,000.
  9. Travel Allowance–You can submit the necessary travel bills and claim deduction for transportation expenses up to amount of ₹9,600.

Should I Gift Money to My Family Members?

You can gift a section of your income to your parents, parents-in-law and adult kids without incurring any gift tax. They can invest these amounts and the interest they earn on them will form a part of their individual tax exemption slabs. You also have the option of transferring your income earning investments in their name.

Keeping these factors in mind, you can take all the necessary steps to save on the maximum tax you can. To read more informative articles on income tax, please visit: Lending Chaupal Tax Resources

For or  more information on filing tax returns, please read the following websites.

  1. https://www.linkedin.com/pulse/20141207101137-167399684-why-indian-people-end-up-paying-more-taxes
  2. https://in.finance.yahoo.com/news/hiring-a-ca-for-tax-filing–5-things-to-note-082133585.html
  3. http://moneyfor20s.about.com/od/investingtools/f/sellingstocktax.htm
  4. http://www.quora.com/What-sort-of-taxes-am-I-implicated-to-pay-if-I-sell-my-apartment-worth-approx-2-crore-in-Gurgaon-and-invest-some-money-in-startups
  5. http://myinvestmentideas.com/2015/01/best-tax-saving-investment-options-in-india-for-2015
  6. http://taxguru.in/income-tax/10-lesser-deduction-claim-income-tax-return.html