Time to Know More about Income Tax Deductions

Filing income tax annually is a necessary task that every individual follows. Whether you are a salaried employee or a business owner, the rules remain the same. You can be assured of saving up a large sum when you pay your taxes strategically.

About Tax Deductions:

If you are looking to reduce the total sum of payable tax, tax deductions can act as a saviour. All you need is to invest your money wisely in various sources to reduce your overall tax liability. The amount of saved tax may vary according to the tax benefit type chosen by you.

In this blog, you will learn more about tax deductions mentioned under the Income Tax Act of India, 1961.

Details about Tax Deductions:

You need to collaborate with a well known income tax advisor in Kolkata to know the strategic ways of saving on your total taxable amount. Tax deductions come to your benefit in two ways. Firstly, you save a large sum on your tax money. Secondly, you invest your money in multiple avenues, most of which are social security programmes.

Difference between Tax Deduction and Tax Exemption:

It is worth noting that a tax deduction is very different from a tax exemption. You get different types of tax relief in tax exemption and may pay the taxable amount at a reduced rate. On the other hand, a tax deduction is a strategic move that can help you lower the total payable amount. Here are some benefits of tax deductions:

  • You pay a lower amount on your taxes by claiming a tax deduction.
  • You can invest the amount received from a tax deduction in other fields.
  • You can get benefits of tax deductions on various expenditures. These include tuition fees, medical costs and donations to charitable organisations.

Investments for Claiming Tax Deductions:

Various strategic expenditures help you save on the total tax amount. These are clearly mentioned by the Income Tax Act of India. You can find various useful options for a tax deduction.

  • Public Provident Fund
  • National Savings Certificate
  • Fixed Deposits in Banks
  • Senior Citizen Saving Schemes
  • Unit Linked Insurance Plans
  • EMIs on Home Loans
  • Stamp Duty Registration Charges

To get an in-depth knowledge of ways to deduct your taxes, take help from SM Gupta & Company. We have a team of expert income tax advisors in Kolkata. You can get insights about useful ways to lower your tax liability from us. We cater to the needs of individuals and businesses alike. Contact us today for more details.

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Income Tax Exemptions for Salaried Employees

 Income tax advisor Kolkata SM Gupta. The Income Tax Act allows tax exemptions for salaried employees. It is quite effective in saving the taxes. The salaried employee must inform his employer about claiming the tax exemptions which are available as an option. Next, the employer will compute the tax on the balance income according to the income tax slab and deduct the TDS on the salary.         

All these tasks can be burdensome, so most employees prefer hiring an income tax advisor in Kolkata for assistance.  

The TDS deducted from the salary is reflected in Form 16 that the employer must give to all his employees. The deduction happens during the financial year. The employees can also download Form 26AS for the same requirement.   

Income Tax Exemptions for Salaried People  

1. HRA Exemption  

Most companies offer their employees’ house rent or HRA. This allows them to reside comfortably in a good place. A portion of this rent is exempted from the levy of the Income Tax. The tax is only applied on the remaining part.  

The HRA exemption is a valid tax exemption for salaried employees. You can claim it easily, and the exemption amount is large.  

2. Leave Travel Allowance  

Most employers give their employees special allowances to go on leaves and vacations. This amount of money is exempted from the taxes to a certain extent. However, certain terms and conditions are applicable. The tax exemption happens only if the employee goes on a vacation in India. This is because the company would ask for bills from the trip. 

3. Encashment of Leaves    

 Most employers give their employees a certain number of days to claim as leaves. However, if you do not claim these leaves, it is an option for en-cashing, i.e. the employers will pay additional money to you for leaves that are still pending. 

This amount is called leave encashment. It is allowed to be claimed under the tax exemptions up to a certain extent.   

4. Pension Income  

Upon employee retirement, most companies pay pensions to their employees. You might have to purchase an annuity to get the pension that the organisation pays. It is basically of two types – commuted and uncommuted. In the former, the amount of pension that you get is in a lump sum. In the latter, the company will pay you the money in instalments after you purchase the annuity.   

Irrespective of whatever type it is, both fall under the tax exemption category to a certain limit. 

For more detail, consult SM Gupta for professional tax advice and consultancy service.