Keywords/Tags - Tax deductions, tax saving options
A Financial Year that begins with some solid tax planning is sure to bear its results in due course. Some of the best ways to save tax is by increasing the good debts and limiting the bad ones. Now that sure requires some sound financial knowledge and forward planning. If you are unsure about the various tax deductions that you can claim when you owe a debt, then read on.
The good debts are the ones that generate revenue and also qualify for Tax deductions, while bad debts are the ones that don’t do either of the two. To be doubly sure about these tax deductions, you can avail our services and our team would educate you on the best available tax saving options. Let us now look into some of the most common types of loans as tax saving options.
Car Loan
In case of a salaried person, a car loan is a bad debt, while a home loan for a second home is a good debt. However, for those who are self-employed, tax deductions can be claimed on a car loan only if it is used for professional purposes and the Assessing Officer has the power to determine this. In this case, the concerned individual can claim the interest paid as business related expenses.
Home Loan
If you are salaried and can afford a second home, then go for it, more so if you feel that paying interest on a home loan is better than paying taxes. Tax deductions under Section 24 of the Income Tax Act, 1961 are available on various transactions connected with the purchase, repair, construction, reconstruction of a residential or commercial premise. However, here we continue to focus on residential properties.
This investment will not only earn you a property but also help you reduce your Tax Liability as the interest paid on self-occupied property is exempt, but only to a limit of Rs.2,00,000. However, you can claim tax deductions for the entire amount of a house that is let out. Also, when spouses jointly own a House Property, each of them can claim tax deductions of Rs.2,00,000 on the interest paid.
However, in case you are desirous of buying a property that is under-construction, then there are no immediate benefits. To reap the benefits of tax deductions on interest, you will have to wait until the property is fully constructed and you are handed over its possession. It doesn’t stop there, you need to also void selling this property for a period of 5 years from the date it is handed over to you, else you lose out on all the benefits of tax deductions.
Education Loan
If you plan to take a sabbatical for further studies in a premier institute that you always dreamt of, then don’t hesitate to pick an Education Loan to do that. The interest that you pay on an education loan is also deductible. However, the principal is not and the best way to benefit from tax deductions on an Education Loan is definitely to pay off the interest thereupon in a lumpsum.
One of the best tax saving measures for Salaried Individuals who fall under the 30 percent bracket is to invest in debts that generate revenues in the future such as home loans. However, for those involved in business and self-employment there are multitudes of tax saving schemes available depending on your business model, its scale and volume.
By Pooja Hegde
Keywords/Tags - Tax deductions, tax saving options A Financial Year that begins with some solid tax planning is sure to bear its results in due course. Some of the best ways to save tax is by increasing the good debts and limiting the bad ones. Now that sure requires some sound financial knowledge and forward planning. If you are unsure about the various tax deductions that you can claim when you owe a debt, then read on. The good debts are the ones that generate revenue and also qualify for Tax deductions, while bad debts are the ones that don’t do either of the two. To be doubly sure about these tax deductions, you can avail our services and our team would educate you on the best available tax saving options. Let us now look into some of the most common types of loans as tax saving options. Car Loan In case of a salaried person, a car loan is a bad debt, while a home loan for a second home is a good debt. However, for those who are self-employed, tax deductions can be claimed on a car loan only if it is used for professional purposes and the Assessing Officer has the power to determine this. In this case, the concerned individual can claim the interest paid as business related expenses. Home Loan If you are salaried and can afford a second home, then go for it, more so if you feel that paying interest on a home loan is better than paying taxes. Tax deductions under Section 24 of the Income Tax Act, 1961 are available on various transactions connected with the purchase, repair, construction, reconstruction of a residential or commercial premise. However, here we continue to focus on residential properties. This investment will not only earn you a property but also help you reduce your Tax Liability as the interest paid on self-occupied property is exempt, but only to a limit of Rs.2,00,000. However, you can claim tax deductions for the entire amount of a house that is let out. Also, when spouses jointly own a House Property, each of them can claim tax deductions of Rs.2,00,000 on the interest paid. However, in case you are desirous of buying a property that is under-construction, then there are no immediate benefits. To reap the benefits of tax deductions on interest, you will have to wait until the property is fully constructed and you are handed over its possession. It doesn’t stop there, you need to also void selling this property for a period of 5 years from the date it is handed over to you, else you lose out on all the benefits of tax deductions. Education Loan If you plan to take a sabbatical for further studies in a premier institute that you always dreamt of, then don’t hesitate to pick an Education Loan to do that. The interest that you pay on an education loan is also deductible. However, the principal is not and the best way to benefit from tax deductions on an Education Loan is definitely to pay off the interest thereupon in a lumpsum. One of the best tax saving measures for Salaried Individuals who fall under the 30 percent bracket is to invest in debts that generate revenues in the future such as home loans. However, for those involved in business and self-employment there are multitudes of tax saving schemes available depending on your business model, its scale and volume.