A Complete Guide to reduce personal taxes
How to reduce personal taxes?
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Introduction
- People are always looking for ways to pay less in income taxes and there are numerous ways to accomplish this. Everyone wants to save more money and build a strong financial future that can support them even in the absence of a regular income. Savings are important to the achievement of any financial strategy, and for good reason. Paying income tax on all of your taxable income, though, can cut into your savings and leave you with less money to put toward future planning. This article will provide you with information on “How to Reduce Personal Taxes.”
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What are personal taxes?
- The government levies a system of taxes called personal income tax on the amount of income generated by individuals. Taxpayers are required by law to file an income tax return each year in order to establish their tax obligations. The government of India depends solely on the earnings from this as a source of funding. A person’s earnings, salaries, and other sources of income, such as pensions, interest, and dividends, are all subject to this income tax.
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What are the ways to reduce your personal taxes?
- There are a lot of ways to reduce your personal taxes-:
- Investment under section 80C can reduce 1.5 lakh from your Personal Tax.
- Your taxable income is reduced by Rs 1.5 lakh as a result of the investments and payments listed below.
- PPF (PUBLIC PROVIDENT FUND )
- Tax Saving FDs
- ELSS (Equity Linked Savings Scheme)
- NSC (National Saving Certificate)
- Life Insurance Premium
- NPS (National Pension Scheme)
- Repayment of Home Loan
- The payment of tuition
- EPF (Employee Provident Fund)
- Senior Citizens Savings Scheme
- Sukanya Samriddhi Yojana
- ULIP (Unit Linked Insurance Plans)
- Tax Saving Mutual Funds
- Fees for a child’s education
- The proprietor has complete control
- Purchasing a Health Insurance can reduce up to 25,000 from your personal tax.
- You can deduct up to Rs 25,000 from your personal taxes under section 80D for the annual premium you pay when you purchase health insurance. If either the policyholder or the spouse is older than 60, the deduction can be doubled to Rs 50,000.
- Claim a deduction on your Home Rent Allowance can reduce your personal Tax
- You can deduct taxes from your salary if it contains a House rent allowance ; otherwise, you cannot. A tax deduction of up to Rs 60,000 is available under section 80GG if you are a salaried employee who pays rent but is not eligible for HRA.
- Deduction on the interest on your home loan can help you reduce your personal Tax
- You can use a tax deduction to lower your taxable income on the amount of your home loan interest under section 24 of the Income Tax Act. The limit under the section.
- Avoided spending from your savings account can help you reduce your personal tax
- One of the simplest methods to lower your taxable income is to claim tax deductions for the interest earned on your savings accounts. Interest earned on savings accounts is free of tax up to Rs 10,000 under Section 80TTA . The limit is Rs 50,000 for senior citizens under section 80 TTB.
- A Charitable donation can help you reduce your personal tax
- Giving to charities that have received government verification enables you to tax deductions under section 80G of up to 10% of your adjusted gross income and a range of 50% to 100% of the amount you contributed. You may be eligible for a tax deduction under section 80GGA if the donation was made to support scientific research or rural development.
- However, your salary does not represent your entire revenue. Income is defined by the Income Tax Act of 1961 as the sum of all earnings under each of the following five income heads:
- Income from Salary.
- Income from Domestic Property.
- Income from business or profession profits and gains.
- Income from investment profits.
- Income from Other Sources.
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Conclusion
- In order to figure out your total taxable income, you must deduct the claimed tax deductions from your total income if you participated in any of the investments that reduce your personal tax mentioned in this article. You can invest your savings for a stable financial future with the help of these investments and payments while also saving tax on the payments and contributions you made. In either case, you can progressively save more tax and buildup a fund you can use to meet financial stability.
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