Don't Let Your hard earned money Slip Away!!
You and me, everyone want to save tax. You must be knowing some ways of tax saving. But still there is scope. Rather, you can always find some extra methods to reduce the tax outgo. Do you want to know the 10 most effective ways to save tax? You must read on this post to save thousands of rupees. This articles is specially written for salaried people.
1. Save Tax On Rent Payment
We get a job in a different city or place. We go there to do our job. If the company does not give us accommodation we have to rent out. We live in rented house because of our job. Therefore, expense of rent should be deducted from the taxable income.
Employers do give some part of your remuneration as House Rent Allowance (HRA). You subtract this HRA from your gross income. However, you cannot take full benefit of HRA for tax saving. There is a formula for the HRA tax benefit.You can deduct the lowest of these from gross income.Employers do give some part of your remuneration as House Rent Allowance (HRA). You subtract this HRA from your gross income. However, you cannot take full benefit of HRA for tax saving. There is a formula for the HRA tax benefit.You can deduct the lowest of these from gross income.
- Actual HRA given by the employer
- 50% of the basic salary plus DA if the employee is situated in Delhi, Mumbai, Kolkata and Chennai. Else, 40% of the basic salary plus DA.
- Actual house rent paid by you, minus 10% of basic salary+DA.
You can also use a HRA calculator to find out the HRA tax benefit.HRA gives you big tax saving. Ask your employer to keep the provision of HRA in your salary structure.Also, Don’t forget to take rent receipts from your house owner. If your total rent of a financial year exceeds 1 lakh then you need to give copies of registered lease agreement and copy of the homeowner’s PAN card.(Note: Claiming bogus rent payment and rent payment to your family member may lead you to serious litigations)
2. Analysing the Pay Structure for Tax Saving Opportunity
One important thing to consider before you jump invest in tax
saving investment options for reducing your tax dues is to review your pay
structure and your household expenses first. Your salary may comprise of
several allowances and perquisites like Leave Travel Allowance (LTA), House
Rent Allowance (HRA), Medical Reimbursement, Uniform Allowance,
Car Reimbursement, Telephone Reimbursement, Books and Periodicals, etc which
may be claimed as tax exempt subject to submission of related proofs. But most
of the employers stop accepting the related proofs towards the end of January.
So now you may not be able to claim all these exemptions, but you can still
claim few of them while filing your tax return to reduce the tax burden, e.g.,
HRA.
3. Leave Travel Allowances and Medical Expense
Some personal expenses are also eligible for exemptions. These Expenses are deducted from your gross salary. Your employer may give you part of your salary as medical allowance. Check with the HR department.
If you produce an actual bill of medical expenses, this allowance becomes tax-free. So, Start collecting medical bills. However, it is limited to Rs 15,000 in a financial year. You can give receipts of medical expense of your dependents as well.
Your employer can give you leave travel allowance as well. You are entitled to tax-free leave travel allowance.
- It is also limited to two times in a block of 4 years.
- The travel should occur while you are on the leave.
- It should be within India.
- Travel should be from the shortest route.
- You can claim the maximum for AC-I of the train journey and economy class of air travel.
4. Invest And Reduce Taxable Income
Certain investments give you tax rebate. These investments come under section 80C deductions. The amount invested is deducted from your taxable income.
Many of such investments come under EEE category. It means you need not to give tax at the time of investment, earning and redemption. However, There is a maximum limit for 80C deductions 1.5 lakhs .
5. Expenses Eligible For Tax Saving
There are some expenses which also give a deduction for tax saving. These expenses are also counted under the limit of 80C.
- Tuition fees for self and children
- Insurance scheme premium
- Home loan principal payment- Home loan EMI has two-part, principal and interest. Principal part gives tax saving benefit under section 80C. Know more about the tax benefit of home loan
These expenses and above mentioned investment in aggregate should not exceed 1.5 lakh limit.
6.Medical Insurance Deduction
Medical Insurance expense gives you the deduction, over and above the 1.5 lakh limit. You can save tax for the health insurance premium of your family and dependent parents. Also, health checkup can also give you tax saving. You can deduce these expenses from your total taxable income.
- Up to Rs 25,000 for the health insurance of self and family. You can also include health checkups of up to Rs 5,000 within this limit.
- Up to Rs 25,000 for the health insurance of parents. If they are above 60 years, This limit goes up to 30,000.
7. Enjoy Tax Benefit On Home Loan Interest Payment
Home loan interest payment enjoys separate tax saving. The limit of deduction for home loan interest payment is ₹2.0 lacs. This deduction can give you a very big tax saving. However, the loan amount should be big to get the full benefit. You can also double your tax saving through the joint home loan.
8. Set Off Capital Gain, Save Tax
Salaried people need to give capital gains tax on their investments. Shares attract only short-term capital gains tax while property and gold attract both short and long term capital gains taxes. However, you can set off your capital gains from an investment with the capital loss of another investment. Note, you can set off short-term capital gain only with short-term capital loss and long term capital gain with long term capital loss only.
You can also carry forward your capital loss up to 8 years. This will give a fairly good chance of tax saving on account of capital loss. Suppose you incur trading loss in shares. This loss can be carried forward up to seven years. In subsequent years your trading profit can be set off with this big loss.
9. Giving Away Money For Charity? Why Pay Taxes
You can save tax on your donations. However, not every charity gives you 100% tax saving. Donations to the PM relief fund, some notified NGO and political parties can give you the 100% tax benefit. You can also donate to scientific institutions and religious body and claim tax rebate.
10. On Time Tax Declarations And Investments
Practically, this is the most important tip of tax Saving. Employers need to pay advance tax every quarter. Therefore, they deduct TDS every month from your salary. The TDS is deducted according to your projected tax liability for that financial year.
If you don’t declare your planned tax saving, investment and expenses of the year, the projected tax will be higher. Accordingly, the employer would start deducting TDS every month from the first quarter of the financial year. It may happen that when you declare all of your tax saving instruments, It would have become very late. The company may have cut more TDS than required. Of course you can claim tax refund while filing income tax return, but for the time being you pay extra taxes. So, give a tax declaration at the beginning of the year.
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IF You Fail To Plan.. You Plan To Fail..!!
Few days back on a lazy weekend I was hanging out with my friends with non commerce background (engineers). Being the only person with tax and finance background in group, i was asked about various side income opportunities. This triggered a conversation about how to start investing in share market. We discussed how the professional stock brokers and advisers pursue a layman to start investment by giving them vague and illusive figure with enough percentages to impress you. But with a proper PLAN & STRATEGY one ends up with losses and paying huge brokerage charges to the professional. So I decided to write an article and share some pro tips for the newbie and amateurs with no practical knowledge about finance or stock market . If you are the one I'm talking about congratulations mate you are in a right direction and right place.
#1 Source of your Regular Income
Before any investment sort your income. What is your regular and stable source of income? What are your recurring expenditures and liabilities? What is the extent of loss you can absorb? (It is no secret about chances of losses in share market)
#2 Savings equal to
blessings
Always keep a percentage of your income as savings in cash. I personally prefer 10% of income should be kept in bank safe to face any contingency and unplanned expenditures smoothly
#3 Investments in Shares
is not the only way
Investing in Shares of a
company is not the only way of investing in Share market but it is one of the
many ways. Being a new entry or person with no technical knowledge of stock
market you can invest in a portfolio build by professional. These portfolios
are known as MUTUAL FUNDS.
You can track past
performance of these mutual funds to be double sure about your returns on
investments.
- Types
of Mutual fund :-
On Basis of Portfolio
- Debt
MF : portfolio in
majority debt funds and give consistent and secure return but less
than equity MF
- Equity
MF: Portfolio of
investment in equity of listed companies. Highly volatile returns .
On Basis of Investment
- Monthly
SIP: An Investor invests a fixed
amount every month which get invested in SIP mutual funds
- LumSum : Investor invests in a MF by paying a one time
lum sum money in MF of his choice
#4 Investor vs.
Trader
Ask yourself a Question If you are a Investor or trader. Trader: A
person who invest- disinvest and rotates and circulates his money
frequently (Very short term investment sometime for just few minutes or seconds
) Investor: Person who puts his money for longer period for medium or long
term and is not influenced by short term fluctuation
Your Strategy: If you have
sufficient time and knowledge you can become a trader as you would need to keep
a constant watch over fluctuations in price to book profits and to mature an
opportunity but if you are a busy person investing as a side income and cannot
dedicate whole time to market then you should decide your investments as a
trader
#5 Maths of Investment
It means in what ratio you should invest
your money in various financial Instruments
My personal recommended percentage for beginners which may vary with situation
and personal believes
10% Cash: I always
believe every beginner and pro must keep 10 % as cash for contingencies
60 % Fixed returns Investments: 60 % of your investments in investments yielding
fix returns. Debt oriented MF , Fixed deposits with banks or post offices or Saving
Certificates like KVP or NSC which may give fixed return of about 7-9% p.a.
30% Equity: It means Investing directly into shares of a company of
your choice. You directly purchases-sale share of a company directly. It is
risky portion of your portfolio
Again Bifurcate this 30 % of equity in 70% in equity for trading and 30 % for
investment (difference between trading and investments discussed in #4)
For e.g. you decide to start with 1000 Rs. in your portfolio, then you
1. 100
Rs. in your bank as cash
#6 Stop Loss = Seat belt
Whenever you buy a share always apply a Stop loss to it . It is a price below you purchase price and your share automatically gets sold to prevent and restrict the extent of loss.
#7 Buy On Dips
Everyday a time comes
when share price dips to its lowest point i.e. share’s price falls for a while.
Don’t miss that opportunity to buy share at that dip.
#8 Be Fast Be Furious
If you are a slow thinker or a lazy person with a confuse personality, sorry my friend equity is not a right place for you. In equity you should be very fast and clear about your approach to take quick decisions’ to secure your funds within fractions of seconds without any second thoughts or waiting for dust to settle.
#9 Patience
Problem in stock market is that everyone wants to make huge profits within short period But the key is Trading involves emotions and investment require patienceNever panic. Be assure of your investment and never be afraid of losses and risks. Remembers even if you lose you learn something and best part is that with above suggested strategy you would be staking only a small portion of your money
#10 Never Follow
Never follow any Tips, suggestions, recommendations, news trend by any professional, broker, news channel or any other source. It is a bitter fact that some people at high places plant these tips for their benefits and could put your fund at huge risks.So its better to take some time to do your own research, study books and learn basics of stock market. So Friends its never too late to start investment. Start Investing and learning today grow your small savings into huge profits. And if you like this post don’t forget to subscribe to #FinanceFactBlog . Share this post. Like and follow us on Facebook and twitter. Good Luck.
Bookkeeping a Day keeps Bankruptcy Away!
Not literally but it acts as a Red Signal Warning to where your finances are heading to. You may be Businessman, a Salaried Person, A Freelancer or even a home maker but you should maintain your accounts to manage and record your income and expenditures to track your last penny and manage fund efficiently. Profit and loss accounts and ledger should be maintained even in any format you like (if you are not regulated under any law to maintain books)
List of Basic Books
Ledger: A detailed records of all your receivable and payable
Profit and loss statement: A record of all of your revenues and expenditures
Invoice File: A file having all the bills you receive and all the bills you raise during a period
(Authors Note: You should maintain books for as long as you can maintain but for a minimum period of atleast 6 years as minimum period specified by various laws)
Here are Few Reasons to Maintain your books
Following careful record keeping procedures can also help you with tax returns and prevent fraud or theft. Using a good record keeping system will help you to:
- • Track expenses, debts and creditors
- • Apply for additional funding
- • Save time and accountancy costs
- • Pay tax, accurately and on time, avoiding penalties
- • Apply for and receive the correct amount of benefits or credits
- • Gives you the information you need to run your business and help it grow
- • Helps you plan for tax payments
- • Helps identify the strengths and weaknesses in your business
- • Helps manage changes and improvements in your business
- • Will help you plan to meet financial commitments such paying creditors or employees
• Helps to stay organized when dealing with customers and suppliers
• Makes it easier to get a bank loan or overdraft
• Avoids interest and penalties by making it easier to pay the right tax at the right time
• Will support your claims to some tax reliefs or capital allowances.
Producing invoices, quotations and estimates promptly is vital.
An early estimate can be the difference between winning and losing a job. Similarly do not rely on supplier’s statements. You need to know before they tell you how much you owe.
Makes it possible to find important information and documents quickly
• Is someone disputing your invoice?
By being organized you can quickly and easily find information regarding the original order and the goods and work supplied.
• Yes, banks like it when you seek an overdraft for the right reason and at the right time. Don’t wait until you need one to ask for it.
• Penalties are here to stay!!! But we are here to avoid them. By the time a deadline comes everything will be filed and in good order.
What are capital allowances?
They are provisions that can save you a lot of tax when you purchase equipment or similar assets. Don’t miss out on the opportunity just because you have lost the paperwork.
Summary
So, No matter what your occupation of work profile is ,you see that it’s very important to keep good accounting record, even a simple ledger and a profit and loss statement along with all documents for easy tracking and managing of your last penny efficiently
Can you think of any other reasons why it’s important?
Please add to the list and share your experiences in the comments below
Be Tax Savvy not a Tax Thief
There are so many aspects of a small business (SME) that an owner needs to be aware and taxes is an area that can be quite challenging if the business owner does not have adequate knowledge. Consulting a tax professional and the SME Corporate societies are the best steps any small business owner can take, but there are simple tips that business owners can keep in mind to help their business to become as financially successful as possible.
Decide what form of business to use
Sole-proprietor, Corporation,OPC, LLP, or Partnership. Most small businesses fail to keep their business form simple. Often lawyers and CAs will advise to incorporate, but this is usually an overkill for most small companies and requires extra costs for bookkeeping and filing fees. Liability seems to be the big issue, but small business owners can either buy errors and omissions insurance or buy an umbrella policy to help if they are personally sued and proper insurance policies for keyman, stock and other assets. Most small businesses who incorporate and set up an Private corporation usually do it because they are so cash strapped and have no money to pay employees and employment taxes, so they wind up with no employees on the books. As for flow through Public corporations, the IFRS and IND AS are closing the gap on this avoidance.
Keep personal and business expenses separate
Too many small businesses try to write-off their personal expenses against their business income, which can get you in a lot of trouble with the ITA. When writing off expenses, make sure it is an ordinary and necessary expense needed for your business, otherwise you may have a lot of explaining to do.
Keep good records
Business owners can’t pay estimated taxes at the end of each quarter without a P&L statement. Also, bad records cost the business money if owners overlook the good deductible business expenses. It is also recommended small business owners keep tax records for at least three years in case a problem arises. Be prepared even if not mandatory by 44AA by Income Tax Act
Make business tax payments on time
Avoid the penalties and interest for not paying business taxes on time. It’ll save you a headache down the line if you’ve kept up with your payments from the start.
Don’t improvise small loans
It’s important, as an owner, to know where to draw the line when handling money. Desperate times can sometimes call for desperate measures, but when your business and your employee’s livelihoods are on the line, it is best to go about things correctly. When strapped for cash, find a loan through a bank and do not consider taking the taxes withheld from you employees as a shortcut to extra money. If you cannot work around your financial shortcomings, talk with your accountant or hire one right away.
Author: An Entrepreneur, Blogger, Auditor, CA Finalist, tax and business consultant having experience of years in managing business and consultancy with various MNCs . Author could be reached at >>Contact<<
Decide what form of business to use
Sole-proprietor, Corporation,OPC, LLP, or Partnership. Most small businesses fail to keep their business form simple. Often lawyers and CAs will advise to incorporate, but this is usually an overkill for most small companies and requires extra costs for bookkeeping and filing fees. Liability seems to be the big issue, but small business owners can either buy errors and omissions insurance or buy an umbrella policy to help if they are personally sued and proper insurance policies for keyman, stock and other assets. Most small businesses who incorporate and set up an Private corporation usually do it because they are so cash strapped and have no money to pay employees and employment taxes, so they wind up with no employees on the books. As for flow through Public corporations, the IFRS and IND AS are closing the gap on this avoidance.
Keep personal and business expenses separate
Too many small businesses try to write-off their personal expenses against their business income, which can get you in a lot of trouble with the ITA. When writing off expenses, make sure it is an ordinary and necessary expense needed for your business, otherwise you may have a lot of explaining to do.
Keep good records
Business owners can’t pay estimated taxes at the end of each quarter without a P&L statement. Also, bad records cost the business money if owners overlook the good deductible business expenses. It is also recommended small business owners keep tax records for at least three years in case a problem arises. Be prepared even if not mandatory by 44AA by Income Tax Act
Make business tax payments on time
Avoid the penalties and interest for not paying business taxes on time. It’ll save you a headache down the line if you’ve kept up with your payments from the start.
Don’t improvise small loans
It’s important, as an owner, to know where to draw the line when handling money. Desperate times can sometimes call for desperate measures, but when your business and your employee’s livelihoods are on the line, it is best to go about things correctly. When strapped for cash, find a loan through a bank and do not consider taking the taxes withheld from you employees as a shortcut to extra money. If you cannot work around your financial shortcomings, talk with your accountant or hire one right away.
Author: An Entrepreneur, Blogger, Auditor, CA Finalist, tax and business consultant having experience of years in managing business and consultancy with various MNCs . Author could be reached at >>Contact<<
Author: An Entrepreneur, Blogger, Auditor, CA Finalist, tax and business consultant having experience of years in managing business and consultancy with various MNCs . Author could be reached at >>Contact<<
Introduction
The latest turn moil in economy of the Great India biggest tax reform after 2005 VAT. Similar misconceptions, confusions is being faced by masses in the subcontinent. It is a political victory of ruling party to get the GST bill passed in rajya sabha and eventually the the President. It is also deemed and looked as major tax reformer bound to make economy stronger and more stable with perpetual growth. It is a step to unite and bring all the indirect taxes levied on a single stage to form a common market for 1.25 billion population.
Know GST
it’s a blanket indirect tax that will subsume several indirect state and central taxes such as value added tax (VAT), excise duty, CST, different state taxes, central surcharges, entertainment tax, luxury tax and a slew of related levies by local bodies.
GST is a ‘destination-based’ tax, which means it’s charged where goods are consumed, as opposed to where they are produced. Because it shifts the power that several Indian states have had in imposing indirect taxes on the production and movement, a centralized GST Council has been set up that will decide which taxes will fall in the purview of states and which can be subsumed into the GST. A dispute resolution mechanism will also be established to resolve any GST-related disputes.
How it will effect your Pocket?
While it is projected as a major tonic to the economy and GDP with additional increase in atleast 2% growth rate on other hand with short term perspective it will be a mixed bag for the common man with hot and cold emotions. But for a farsight and long term it will be a win win situation for common man as well as economy as it is argued that a welfare economy is not a healthy structure for business to grow but GST is tend to turn the tables. Basis the GST implementation experience in most countries, India may witness an inflationary impact during the transition phase, which should fade away with the legislation sinking in and operationalizing of measures like anti-profiteering
These services are likely to become more expensive
A commoner should, at least till the time the service industries do not pass on the benefit of increased credits, budget for some increased pocket pricking on some necessary services like:
- Mobile bills
- Renewal premium for life insurance policies
- Banking and investment management services
- Basic luxuries for a common man like WIFI and DTH services, online bookin
Prices of these essential services also likely to rise
Also, in the backdrop of quite a bit of current exemptions subsiding, various essential services may cost an arm and a leg under the GST regime. For example, where the current exemptions are discontinued:
- Residential rent
- Health care
- School fees
- Courier services
- Commuting by metro or rail may become expensive
Final Word
Implementation and success of any big or small reform depends purely upon intention of government and mutual effort of the masses. Without mutual efforts no reform could be made successful.Rest lies in the lap of future. LIKE MY POST ON THE BLOG SO GUYS WISH ME AND GST GOOD LUCK FOR OUR EFFORTS AND FEEL FREE TO GIVE SUGGESTIONS CORRECTIONS. THANK YOU 
.
DISCLAIMER:These are personal views of author with inputs from various government and other sources. Readers Discretion is advised.
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DISCLAIMER:These are personal views of author with inputs from various government and other sources. Readers Discretion is advised.
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