As a responsible citizen, you require to pay the appropriate amount as a tax to the respective government that is calculated on the basis of the income you receive from both the business you do and also, your profession earnings. Here go some steps to deal with the tax that could bring you benefits.
- Returns from the capital gains
- The practice of indexation. The notion of indexation is truly dependent on the concept of the time value of the currency you use. Consider, for example, you purchased a building situated at the prime location of the city for about 7lakhs currency in the year 2010 and now, in the year 2019, you sold the same at a price of 37lakhs. Hence, you made a long-term gain of 30lakhs which you think is fully taxable. However, that is not the real case. Instead, every year, the finance department of the country announces the indexed cost or CII and is further, used in calculating the tax amounts too.
- The trick played by Mutual Funds. There exists a rule in the mutual fund sector that you would be exempted from paying full tax if you sell your units only after a year or so. However, the fact you need to understand is that if you are making your payment as an installment per a fixed period, then the whole installments would not be matured as the long-term ones after you really pay off the whole money. This means, only the first installment is long-term type rest all are accounted in the short-term capital gain only. So, sensibly sell your mutual fund units to avoid the tax extras on short-term capital gains.
- Exception cases. As per the Income Tax Act, you would be made free from paying taxes on long-term capital gain if this amount is reinvested immediately for other government realizable targets. There could be a regular notification from the government regarding this matter too.
- Reductions made on insurance policies.
- Guaranteed savings under insurance premium. This is a source that secures the financial protection of a family along with good returns on your investments made with it. Also, the premium payments can be employed by other members of the family in cases of medical emergency or so.
- Provident fund service for the public sector. This is a popular scheme recommended by the government that provides productive interest rates on the fixed type of cash deposits. In addition, this interest is totally free of tax.