While financial prudence is never out of vogue, if New Year resolutions are your thing – we bring you a set of 5 financial resolves you must make now! These should put you safely through the tax year close which is just about 3 months away!
- Maximize Deductions & Save More Tax– If putting more money in your savings is your financial goal, you need the Section 80 deductions to work for you. Did you know Rs 1,50,000 can be knocked off your Total Income with the help of Section 80C deductions?
- Investment based Section 80C Deductions – Rs 1,50,000 can be invested in a PPF account in one year. PPF helps you earn tax free interest. To earn interest for a month, make sure your PPF deposit takes place from 1st to 5th of that month. Don’t have a PPF account – consider purchasing NSCs from your local post office. Interest that accrues annually on your NSCs is taxable and is shown under the head Income from Other Sources. Interest is also considered as a re-investment; therefore, each year’s interest can be claimed as a deduction under Section 80C for that year.
- Expense based Section 80C Deductions – Expenses like Tuition Fees of Children, Principal Repayments on a housing loan and life insurance premium are also eligible to be claimed under Section 80C. If you don’t have funds to spare to make fresh investments, do remember to include these expenses under your Section 80C deductions.
- Other Section 80 Deductions – There are a host of other deductions you should take advantage of. Are you planning to pursue higher education? Deduction is available for the entire interest payout under section 80E. This deduction is available for a maximum of 8 years. Deduction under Section 80D is available for Medical Insurance purchased for your family, including your parents and the maximum amount you can claim is Rs 40,000.
- Should you buy your first house – It’s a good time for you to take this decision. The government has been incentivizing home buying and plethora of tax deductions is available on a home loan. When you take a home loan to buy or construct your first house, you can claim a maximum deduction of Rs 2,00,000 on the interest. When this house is rented, you are allowed to claim the entire interest as deduction. Principal repayments, expenses on registration charges and stamp duty are allowed to be claimed under section 80C. If due to some reason you cannot live in the one house that you have taken a loan for and you are living on rent, you can still claim your HRA as well as claim deduction on interest on home loan. Is 2015 going to be the year for you to own your first house, resolve to make the most of tax benefits on owning a home.
- Making Short Term Capital Loss work for you– The stock markets have been volatile and you may have incurred short term capital loss. This short term capital loss can help you save tax. Short term capital losses on shares if not set off within the same year, can be carried forward for 8 years and set off against short term capital gains on shares that you earn in future. The only condition is you must file your Income Tax Return before 31st July, the last date for filing of returns. Track all your losses and remember to include them in your Return, which you must resolve to file within the due date.
- Staying up to date with your Form 26AS – TDS which is deducted from your Income is shown in this form. Sometimes the deductor makes an error with your TDS deduction or your PAN may have been quoted incorrectly. In such cases, TDS which is already deducted from your income may not show up in this Form. You may not be able to take credit of TDS which is deducted but does not show up in your Form 26AS. Do spare time to go through your Form 26AS and validate your TDS entries, correcting mismatches before the financial year ends can save you tax!
- Getting your paperwork in place – Do you claim HRA? Remember to organize rent receipts and getting rent agreement with your landlord in place. If your company gives you a medical allowance based on medical bills, start collecting these in a folder and claim these on time. If you have a home loan, remember to ask for an interest certificate and submit this document to your employer – that way your employer will give you deduction for interest on home loan and deduct less TDS from your salary income. Avoid last minute tax filing hassle by getting your paper work in order.
We hope these resolutions will help you sail through the tax year which is nearing close too. ClearTax wishes you a prosperous and fulfilling 2015! If you need help with your taxes, our experts will assist you.