It’s that time of the year when you need to declare your taxable income. So, get your financial documents ready, including proofs of your tax-saving investments in ELSS, PPF, 5-year FDs, health insurance, and HRA documents, if any. Make sure that you are declaring your investments for claiming deductions in the particular sections defined under the I-T Act.
Do not get disappointed at the last moment when your salary gets deducted due to tax liability falling upon you. If you are a new employee or have just started earning a decent amount which can increase your tax liability, here are four simple things for you to know:
What does income mean?
Income does not only mean the salary you are getting from your employer. Under the Income Tax Act, an income is defined as the source of money which you are getting mainly under 5 heads — income for salary, income from house property, income from business and profession, income from capital gains and income from other sources. While filing the declaration, you need to mention all your income under the Act.
You may also watch:
Are you liable to pay tax?
It is necessary to check your income tax slab every financial year on a regular basis, which will tell you the exact savings you need to do to save your taxable amount. An individual whose income is below or up to Rs.2.5 lakh pa does not require to pay tax, but then also, they need to keep an eye on tax slabs because some of the other people in their family must be falling under the tax paying criteria.
For individuals who are below the age of 60 and are born after April 1, 1957, the following tax slab is applicable for computing the tax liability in the financial year 2016-17 and the assessment year 2017-18.
What are the tax deductions available?
You can claim deductions under 80C for up to Rs.1.5 lakh with an additional investment of Rs.50000 under section 80CCD(1B), if done in NPS, for your retirement benefit. A new individual home buyer can claim tax deductions under section 24 for up to Rs.2 lakh and an additional amount of Rs.50000 under section 80EE (adhering to certain conditions). However, the principal amount of home loan is claimed under section 80C only.
You can also avail 100% rebate of Rs.5000 or less under section 87A if the individual’s income does not exceed Rs.5 lakh. The deduction is made before calculating the education cess.
Premium paid for health insurance can be claimed under section 80D of the I-T Act with a maximum ceiling of Rs.60000 (adhering to certain conditions).
Interest on education loan can be claimed under section 80E of I-T Act by any individual who has taken an education loan.
If you live in a rented house, you can claim the HRA by providing your rent agreement to the employer along with the PAN card of your landlord if the monthly rent exceeds the amount of Rs.8333.
You may also watch:
How can you avail tax benefit under section 80C?
Investing in various instruments like ELSS, PPF, insurance, fixed deposit, etc can help you avail tax benefit under section 80C. The maximum amount of deduction available under this section is Rs 1.5 lakh only. Suppose you invested Rs.1 lakh in ELSS fund and Rs.1 lakh in FD in the current financial year where you made a total investment of Rs.2 lakh, declaring the same you will only get the rebate of Rs.1.5 lakh under section 80C. However, there is no limit for making investments under the following instruments.
Do you need to file a tax return?
A tax return is filed by the taxpayer in case of claiming any refund. It is not mandatory for individual earning below or equal to Rs.2.5 lakh pa, but ideally, everyone should file their tax return. Filing of return on time also helps in getting a loan very easily.
Due date for filing returns will probably be on 31st July 2017 for the assessment year 2017-18. So, it is better to get your income declaration on time to avoid late refunds from filing ITR.