Kaise Bachhaye Tax Return in India

Kaise Bachhaye Tax Return in India

When somebody says, 'Tax Returns' our brain switch just turns 'off' because who will do all that paperwork?! plus it's so complicated to understand.

But think about it, we are already paying so many taxes... Taxes on food, taxes on clothes, taxes on travel, taxes on movies! So, Ladies and Gentlemen, it is time to turn that switch back 'on' because by doing our taxes we can save a lot of money, and that in turn will get us more money.

It's just like setting up a money tree. I know the concept is sounding like a fraud but.. Trust me! Today I am going to tell you 5 Legal ways of saving your taxes and growing your money automatically.

What is Tax and how much are we paying?

5 Legal Ways of saving taxes - Kaise Bachhaye Tax Return in India

But most importantly, a Bonus Tip I'll tell you how to do your tax calculations so that you pay the least tax possible.

Let's begin! Now, what is Income Tax? Suppose you are earning 'X amount of money.

Out of that, you have to give away some to the government so that it can use it for public services.

Now we can't control how and where our government is using our money but the Income Tax Department of India gives us back our money, if... we save more money.

Isn't that great? Before I tell you how, let's first understand how much are you paying in the first place. It all depends on the tax slab you fall into.

Checkout Our Tax Slab for Tax Return Bachhaye  in India

  1. If your income is less than 2.5 Lakh per annum, then you pay 0% tax on your income.
  2. If it's between 2.5 L to 5 L then you have to pay 5% tax on your income after you deduct 2.5 L from it.

For example, suppose you are earning 4.5 L per annum. Subtract 2.5 L from it because for 2.5 L you don't have to pay any taxes. What's remaining? 2 Lakh.

Now you have to pay 5% of 2 L, which is Rs.10,000 and that is the income tax you are paying. If your income is between 5 L - 10 L per annum then you need to pay 20% income tax.

And for more than 10 L, it is 30%. This tax slab is different for senior and super-senior citizens.

So as you can see, 30%, 20% and even 5% are too much especially when we are paying GST for everything.. food, clothing, travel, petrol, internet, electricity, movies; it's like we are paying taxes for breathing!

So if the Income Tax Department itself is giving you back your money i.e rebating your money then why won't you take back your own money?

Now, how to get back your money? There are 5 ways to do it. The first method involves spending money a certain way and the rest 4 are by saving it.

Let's start with spending money. The Income Tax Department will give you back your money if you spend it on the following things. a. House Rent Allowance In your salary slip, you would've noticed there is something called 'HRA', House Rent Allowance.

House Rent Allowance Tax Saving Tips

If you are paying rent, then under Section 10(13A), you get an exemption of an amount that is equal to the minimum of these 3. 1. Your HRA from your salary slip.

2. 50% of your basic (if you are living in a Metro) or 40% of your basic (if you are living in a Non-Metro) or 3. The rent paid by you - 10% of your Basic.

Take The Example For Understanding Tax Returns 

To simplify this, let's take an example.. Suppose you earn Rs.50,000 per month. Your Basic is Rs.25,000. And according to your company policy, your HRA is 40% of your Basic, which is Rs.10,000.

So we are assuming that this is how your salary slip looks like. 

Option 1 

is direct. HRA is Rs.10,000 which we directly picked up from your salary slip. 

Option 2 

It the same as Option 1 because your company decided that your HRA is 40% of your Basic, which is what most companies do. 

Option 3. 

Let's assume you pay Rs.7000 per month as rent. So 7000 - 2500 (10% of your Basic) = Rs.4,500 Now among 10K, 10K and 4,500, which is minimum?

Obviously, Rs.4,500. So 4,500 X 12 = Rs.54,000 is your tax-exemption. Now remember this Rs.54,000 because, towards the end in the Bonus Tip, I will show you how this Rs.54,000 will reduce your taxes.

Tax Saving Tips For Rent Home Loan

Moving from rent to home loan. Suppose you are living in your own house and have a home loan on it then congratulations because you can claim both principal and interest.

Under Section 80C, you can claim the principal and the max limit of 80C is Rs.1,50,000.

Under Section 24, you can claim the interest and the max limit is upto Rs. 2,00,000. Third expense, Provident Fund.

This is something, you have to contribute in, while you are working. The best part is, it comes with a tax exemption under 80C.

So your PF is usually 12% of your Basic. If we take the example of this salary slip, then 12% of Rs.25,000 will be Rs.3,000. Multiply that by 12, you get Rs.36,000. Remember this Rs.36,000 also because towards the end I'll show you how this will also reduce your tax.

Fourth and the most important expense, education. 

Under 80E, suppose you or your spouse or your children, take an education loan then you can claim the interest until it is fully paid or for 8 years, whichever is sooner.

This means, suppose you took a loan for doing your engineering then you can claim it even while you are doing your job.

80E is for education loans but under 80C, you can also claim the tuition fees of your children. Only for the first 2 kids, ok? Because, 'Hum do hamare do!' And finally, under 80G, you can file returns for a maximum of Rs.10,000 for contributions made to charitable institutions, relief funds.

4 saving options is best for you we are going to compare them based on 3 parameters. 

1. Lock-in period, which is how long you'll have to wait before you take out your own money. 

2. Average returns which is the % of interest you will get out of it. 

3. Tax on Maturity which is the amount of tax you'll have to pay on the final amount that you get at the time of withdrawing your money.

Let's start with the option of Saving Money through PPF. PPF stands for Public Provident Fund which is basically a retirement fund.

So if you save your money through PPF, then you can save your taxes under Section 80C.

The sad part is, the Lock-in Period of PPF is 15 years and if you are in dire need of money then you can withdraw only after 5 years and only upto a certain percentage. So withdrawal is definitely a problem with PPF. The average returns is around 8% but the good part is you don't have to pay any taxes on the final amount at the time of withdrawal. Our next option is a Tax-Saving FD, which is basically a type of Fixed Deposit that comes with a tax benefit under Section 80C.

The best way to invest in a Tax-Saving FD is in a bank that has your salary account. Because that way you can automatically set up for the FD amount to directly move to your salary account after maturity without you having to do anything. Our next saving option is Health Insurance.

I know what you are thinking... 'Nothing bad will happen to me.' But bad luck doesn't knock on the door before coming and you wouldn't want you or your family to spend all your savings or worse beg for money.

The best part about Health Insurance is that it helps you save taxes. Under Section 80D, you can claim upto Rs.25,000 for yourself and your dependents and an additional of Rs.30,000 if both your parents are above the age of 60. 

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