Last Minute Tax-Saving Checklist for Assessment Year 2020
Nobody likes to pay taxes, but it is a necessary evil! We are all a part of a society, and we must contribute to it as best as we can. Income tax is one way in which we can contribute to the development of our country.
At the same time, we must try to ensure that we do not have to pay extra money in taxes when we can take better care of money ourselves. As March 2020 approaches, the time for taking care of your tax matters is running out very fast.
Here is the last minute checklist for ensuring that you have done tax-saving correctly this financial year.
1. Have you invested in PPF?
The Public Provident Fund is one of the best choices for tax saving offered by the government of India. The Public Provident Fund is the best investment vehicle available as of now as it is the only Triple E investment option. You do not need to pay any taxes on the money you contribute to your PPF account. The interest and returns are also tax-free. This is a secured account, and the Government of India will take care of your savings, and there is no way you can lose them. The only problem with PPF is its long term commitment, but with these high returns, you can always wait for some more time to get your money back.
2. Have you paid your insurance premium?
Life Insurance is necessary for everyone, especially those who are working. It is the necessary protection umbrella for your family and loved ones. At the same time, it is also a great tax saving instrument. The premium you pay for your insurance is deductible under Section 80C of the Income Tax Act. This means that you will not only ensure the safety of your loved ones but also ensure that you have more money in your hands, down a few years.
3. Have you purchased medical insurance for yourself or your parents?
Medical insurance is necessary for everyone these days because medical care is becoming more and more expensive. To ensure that most people in India have medical coverage, the government has brought medical insurance premium under tax benefits. You can claim up to Rs. 50,000 of the medical insurance premium paid for your family. For your parents, you can claim up to another Rs. 50,000 or more depending upon their age.
4. Did you buy a new house this year?
The Government of India is working a lot to ensure that people get at least one home that they can call their own. Purchasing a new home provides a number of tax benefits if you do it on a Home Loan. The amount you pay to register your home is deductible under tax section 80c. The principal amount you paid in the EMI of your Home Loan is also deductible under tax section 80C. The interest you pay on Home Loan in your EMI is deductible under tax section 24 up to a maximum of 2,00,000 rupees.
5. Did you pay tuition fees for your children in the school year?
The tuition fee that you pay for your children is also tax-deductible under section 80C. You will have to get the school fees payment receipts to make a claim.
6. Did you pay house rent this year?
One component of your salary is your house rent allowance. This house rent allowance is also tax deductible up to whatever amount you received as your HRA. If, however, your employer does not specify HRA as a head in your salary, you can still benefit here. If you are living in a metro city like Delhi, you can claim up to 50% of your salary as a house rent deduction. If you are living in a non-metro city, you can claim up to 40% of your basic salary as a house rent deduction. Please note that you will have to submit the PAN number of your homeowner if you are paying more than 1,00,000 rupees per year as the house rent.
7. Have you started to plan for your retirement?
All of us will retire one day. Everyone needs to save some money for retirement. The government of India provides tax benefits to people who put in money for their future retirement in the National Pension System. NPS allows people to live with dignity when they are not able to work anymore. This deduction is available under Section 80CCD (1B).
8. Are you repaying an Education Loan?
Good quality higher education is costly, and most people need loans to pay for it. The section 80E of Income Tax Act allows you to deduct the amount that you pay as your Education Loan EMI from your taxable income. This Education Loan could have been taken for your education or for that of your children.
9. Have you made any charitable donations?
The section 80G of Income Tax Act allows certain charitable institutions to offer tax exemption certificates against the contributions made to them by their donors. You will have to submit the receipt of the donation made towards an identified charitable institution.
10. Have you made any rural development donations?
Many people who pay Income Tax in India come from villages. If you have contributed some money towards the development of your village through concerned authorities or rural development organizations, then you can claim that amount as a tax deduction under section 80GGA.
These are just some of the many tax deduction options available to people required to pay income tax in the Assessment Year 2020. If you are working for a company, it is best to check with your employers on whether there are any other tax deduction options available, for example, leased car, leave travel allowance, or meal coupons. If you are self-employed, you can check with your Chartered Accountant on what expenses you can claim under Income Tax deduction
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