You could be filing your income tax returns year on year like a run on the mill job and still be ignorant to basics on how to save tax. Did you mention having a CA too, who you thought mostly did a neat job at saving your taxes. In this article we will attempt to unveil the things they didn’t tell you about saving tax.
Let’s begin with the basics
Never approach your CA at the last hour to file your tax returns. He is a busy person at this time of the year and has many like you knocking his door. This could just lead to confusion or incorrect filing at times.
Know your basics
Delay in filing of income tax attracts penalties. You are generally liable to file your income tax through the online facility. Things no one told about saving tax is, manual filing of tax can be done only by those whose salary is less than 5 lakh an annum. If your income tax filing has been done, the job is not over yet. Have you heard of ITR V? This form needs to be filled and signed manually before it is set out in post to the income tax department. The procedure needs to be completed within a period of 120 days else, you may end up re-filing the tax and bear late submission penalties.
When gifting there are two parties involved
The giver and the recipient. Let’s say you earn Rs 10 lakhs per annum and gift Rs. 1 lakh to you wife who is a home maker. Expecting that your taxable income now stands at Rs 9 Lacs only. Incorrect! Surprised? Your wife of course will not be paying any tax on the received amount. But, when it comes to calculating your tax return you will have to pay tax on your total income of Rs 10 Lacs and whatever is your income post tax deduction is the income you can gift out of.
The government is aware that people gift money to their family to save tax and hence to combat this, there is the ‘Income Clubbing Provision’ rule. Under this provision one has to pay taxes on his income and cannot transfer his income or assets, sourced from his own income into another person’s name.
Well, if this has put you into a tizzy, you need to know a bit more
If your wife decides to invest the money she received as gift from you and she earns another Rs 10,000 on it. Lucky her! This amount of Rs. 10,000/- will add up to your income and now any tax deduction will be applicable on your income of Rs. 10.1 lakh. And you thought your CA was the only smart person around. So you can gift to your spouse, their brother or sister, your brother or sister or whoever you like in your close family, keeping in mind this income is not taxable for them but for you.
Save Tax On These Incomes
Now, for the good news. You probably did not know all of this either. Allowance that you receive as a part of foreign services while stationed out of India remains tax free. Gratuity amount in complete is tax free for government employees and partially for non government employees. Scholarships and awards are completely tax free. Any money received as inheritance is also tax free. Stamp duty and registration fee of the documents for the house purchased can be claimed under deductions as well. So, stay aware! Save tax.
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