How to save tax in India?

How to save tax in India?

Hey peeps!!! attention please, we have a guest post here, Before we go for How to save tax in India, let’s know about Sohith Agepati, he is  an Ex-banker and Chartered Associate of Indian Institute of Banker (CAIIB)  of IIBF. And he also blogs on Sohith.com. He blogs about the knowingly unknown facts, like he is finance adviser, a philosopher, and short film maker, to know more about him check his website.

Now lets have a look on How can we save tax in India by only getting some little information.

Save Tax in India

Though Indian tax rates are not too high as compared to developed nations the social benefits you derive from the government of India are so poor that most of the tax you pay end up in the pockets of politicians and contractors through some stupid government schemes and projects. So it is essential that you stop wasting your money by paying excess taxes whenever possible through efficient tax management.

  1. Always plan your taxes at the beginning of the financial year.

At the beginning of financial year i.e., in the month of April you should assess how much you might earn and how much tax you might end up paying to the government. This will give you a lot of time on how to minimize your taxes and plan your investments and spending accordingly.

  1. Maximize deductions.

There are some deductions via HRA, PPF, EPF, ELSS, Insurance, Education fee and Home loans that will save your money from being taxed. If you are high-income earner then you should maximize most of the investment and insurance schemes that allow deductions. One and half lakh in PPF will not only save 30% tax on it but also in some cases reduce your tax bracket too.

  1. Exempted Income and more.

Certain income especially those from agriculture are not taxable. Make sure you use it when you have agricultural land. Certain incomes like royalties on books, patents etc have deductions on them. Read the tax laws from income tax department website and find each and every deduction that applies to your situation.

  1. Start a Business or become self-employed.

The beauty of being self-employed or having an own business is that almost all your expenditure are not taxed as profits are calculated only after subtracting all your expenditures. In case of salaried employee his total income is taxed and then his expenditure on food, travel, rent etc are usually paid from the remaining income. In case of a business, the expenditure becomes part of business expenses and only net profits are taxed. That’s why self-employed people pay fewer taxes than salaried employees.

  1. Deal in Cash and buy fewer luxury items

Every transaction and price includes a hidden component of tax we pay to the government. By dealing in cash we can reduce the burden of taxes that plague both customers and traders. By purchasing fewer luxury items we reduce the overall taxes that we pay to the government as a part of their prices.

  1. Don’t change investments quickly. Always think of long-term gains.

Changing your investments and moving your money unnecessarily between investments, accounts, schemes and stocks etc leads to short-term gains taxes which are unnecessary if only you planned well before investing your money. Hold the stocks and mutual funds and real estate you bought for a few years until the long-term clause kicks in and your gains become tax-free in India. Remember every short-term buy and sell has a cost and a tax to be paid.

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