Just imagine the condition when you do not have proper income savings in your bank account at the end of a year. And you wonder where all your money went. However, such a condition can be prevented if you take steps like wisely paying for the tax to the government. Here are some tips that you could stick to for tax savings.
- Savings on your profession income.
- Be cautious enough to pay tax instantly at the contract source itself. As stated in the Income Tax Act, when a financial transaction is made for using a particular service, the purchaser has to also deduct the tax amount promptly. Or otherwise, there can be chances that you become heaped with a huge tax burden amount and finally, there would be a need to pay an amount double to the actual sum.
- Avoid making a daily cash exchange of over 20,000 currency to a person. Abided the Act, only cheques or drafts can be used for such high payments. On the contrary note, your income can be thoroughly checked and can be levied with an increased tax rate for your action.
- Make sure you hide those indirect income sources that are taxable under other departments. Most of the population are not aware of this situation and hence get stamped with extra taxes. Even you could also be denied of claiming the tax benefits too. Further, there exists a special case under the Income Act that you can annually deduct the interest rate obtained on the saving type of account for an amount of 10000 currency. Alternatively, this cash might be charged along with your other income and such an explicit offer will surely be skipped.
- Make it a practice to timely file your income tax returns. By doing so you get a chance to avail many associated benefits like setting off the losses on business income by taking forward the losses to another eight consecutive years. Further, if there is no loss in the current year, your losses are easily tackled.
- Savings made on account of any type of capital gains.
- Know the short- and long-term idea of capital gains. Generally, most of the people are not aware of this scheme. This can be better described as holding the capital asset for more than long three years can profit you with the long-term capital gain after actually selling it. Likewise, short-term capital assets are sold within a period of three years and are taxed at a fixed rate of fifteen percent.