Tax is probably the most disliked term in the economy for the middle class, elite class and corporate giants alike and may be the taxmen also. The relaxing part is that there are many legal loopholes within the taxation framework allowing tax exemptions under various covers, some of which are directly managed by the tax collectors themselves. Examples of the most popular and directly levied tax relaxations are provident funds, house rental allowances, charity donations, health policies etc.
Higher level tax exemption methods include the celebrated housing loan schemes, savings certificates, long-term deposits etc. These provisions do help us to ease the tax stain to a great extent, but still, the impending tax slabs may rob us from availing real eligible tax benefits. The reasons may be:
- Uniformly set maximum cut-off to the maximum deductible amount in each section, thereby putting you in a higher slab because of a negligibly higher figure.
- Lack of awareness about lesser know sections which have lower figures of relaxation, but can have a commendable cumulative benefit.
- Over-relying on certain tax-reduction schemes without considering the possibilities of losses and set-offs.
- Other reasons like improper filing of tax returns, lapse of important deadline dates, missing out on columns and minor deductions etc.
The key to intelligent tax saving, irrespective of the schemes utilized is the systematic ordering of incomes, expenditures, tax saving plans with implementation of accessory options to reduce tax losses.
If this year is gone, plan for the next year
Do not allow the tax saving options that you deserve with your current financial management after you discover this info here on some loopholes. Consider the case of your housing loan. You may be spending double of the maximum amount allowed by the tax exemption on account of the interest payments and maintenance every year, which is actually a loss on capital. The same is the case for many other long-term capital gains when the sources of income are not properly channeled. If you are saving in excess of the maximum permissible amount, do not leave it to go. Instead, take it as a set-off and carry over the amount to the next year under the same income head. Loan interest amounts vary every year and you may not be paying the same divisional amount even though the installment remains the same.
If you are incurring a capital loss under one section of income as the limit is overflowing, certain categories can be used in swapping as a set-off for availing the relaxation. If neither of the two methods can be followed for the following year, keep them ready for the future years.