Prepare Automatic Income Tax Arrears Relief Calculator U/s 89(1) with Form 10 E for the F.Y.2021-
22|Taxes are the biggest concern for most of us. Like me, there are many who do not understand the
process and are worried about how to get through it at this time of year. We either hire a specialist or
rely on our CA to file for us. However, it is good to know at least some basic facts about taxes. When
filing your income tax return, you will come across various sections under which you have to declare
your income, investment and expenses., You must first understand the basic concepts of tax deduction,
tax deduction and tax rebate. You may be surprised to know that these three will help you reduce your
tax outgo.
Tax exemption
Most taxpayers are entitled to a rebate to reduce their tax liability. In other words, no tax is levied on expenses, income or investment to reduce the overall taxable income. Here are some of the many items that are eligible for tax exemption:
Home Rent Allowance (HRA)
Company accommodation Allowance (LTA)
Money has been received
Agricultural income
Capital gains under Sections 54, 54CE and 54F
Tax exemption should be claimed only from a certain source of income and not from total income. For example, it is not permissible to claim a waiver from any other head under the salary heading.
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Tax deduction
Claims for tax deduction are allowed only if the taxpayer has incurred a certain expense or made a tax-exempt investment. This is a deduction from the total income due to expenses like medical, education, transportation etc. The goal is to reduce the amount of income that is being taxed. Some of the taxpayer discounts available are:
Section 80C for certain types of investments like Provident Fund, Public Provident Fund, National Savings Certificate, Equity Linked Savings Scheme etc.
Section 80D for medical insurance premium.
U/s 80E education loan Interest
Section 80G for grants.
Section80TTA for interest on a savings account.
The range of each cut is different. Read our blog post for a complete list of saving options. Therefore, by making some investment you will be able to reduce the total amount of tax payable.
Tax exemption
A tax rebate is a tax refund when a person has less tax liability than the tax paid. In other words, it refunds the tax received in the previous year. According to the Interim Budget 2019, persons with taxable income up to Rs 5 lakh will get full tax exemption under Section 87A of the Income Tax Act. Under Section 87A of the Income-tax Act, it has been to increase the maximum tax rebate from Rs 2,500 to Rs 12,500. This proposed tax rebate will be acceptable to taxpayers with a taxable income of up to Rs 5 lakh.
Therefore, tax deductions and tax deductions help save money by paying lower taxes, while tax rebates refund the extra money paid for additional taxes in the previous year. These are allowed by the Income Tax Department to reduce a person's tax liability. Therefore, take full advantage of these benefits to maximize your savings.
