Income Tax Return : Answers to all your Questions

“An informed citizenry is at the heart of a dynamic democracy.”

Filing an Income Tax Return is something that will happen once you begin working and earning your own money. Therefore it is crucial that you are well informed about the same.

Whether you are a salaried individual or an entrepreneur or whether you make a rental income, or earn an income from your investments, you have to pay taxes to the government. Filing income tax return may not be mandatory if your income is below the basic exemption limit.(i.e. Rs 2,50,000 for citizens below the age of 60 yrs , Rs 3,00,000 for citizens between 60 to 80 yrs and Rs 5,00,000 for citizens above the age of 80 yrs). But several benefits and the right to claim tax refunds are open to only those who file their income tax. ITR is a common prerequisite for while applying for loans, credit cards and several other purposes. Visa application approvals require an individual to become tax-compliant, as these documents act as the applicant's income proof.

According to your income range there are various tax Slabs which the income tax department has created. Currently you can pay your tax either by existing tax regime or new tax regime. You can now file your income tax return online through the e-filing portal by income tax department.

Since you have gathered some information related to why it is necessary to file an income tax return, you may now be wondering about the ways to save on it. Following are 2 ways to help you save on your income tax:

1. ELSS Scheme:

If you are an aggressive investor and you are looking for high returns in addition to tax benefits, you can consider investing a total of ₹1.5 lakh per year in Equity Linked Saving Schemes (ELSS). This is a tax saving mutual fund that has the potential to offer double-digit returns. In other words, you can avail tax benefits in the short-term and earn good returns in the long-term.

2. Public Provident Fund:

If you have a moderate risk appetite, you can invest a portion of your money in Public Provident Fund(PPF). This strategy gives you the required tax benefits and also helps you balance your risk and returns. 3. If you are totally risk averse, you can invest in saving fixed deposits . Here, you avail the same tax deduction of ₹1.5 lakh.

But, while these avenues offer you fixed returns, the rate of return can be quite low (just between 6-8%). This can be a problem if you take inflation into consideration.

You can also claim tax benefits for premiums paid towards health insurance for self, spouse, children and parents and term insurance plans. You can also invest in the National Pension Scheme or the Atal Pension Yojana for tax benefits. It is therefore necessary to do tax planning at the beginning of the financial year so that you can avail the tax benefits.

Written by Saksham Shetty