Half your income going into taxes?

Here are 10 questions to ask your Chartered Accountant!

The Burden of Taxation- Eased by Knowledge (Image Source: Sqrrl.in)
You are not your Accountant’s only client
  1. What are the various important income tax-related deadlines? Every year, the income tax department comes out with a calendar that has dates for all its important deadlines related to — Advance Tax, TDS, Form 16, Filing ITR. Get all your paperwork done to avoid any penalties and interest for overdue taxes and late payments.
  2. How many heads of income do I have? Oh, if you didn’t know — There are 5 — Salary, Business Income, House property income, Investment and capital gains income, Other Sources (like interest and lottery). The calculation of taxable income from each of these heads has its nuances. Understanding your Computation of Total Income will give you some clarity as to where you stand and even how much money you are truly making.
  3. What are the deductions available for my salary income? The standard deduction of Rupees fifty thousand is one. There are many such. Your entire salary structure can be better worked out not just with your CA but even your company HR, so that you end up paying clever taxes, not too much taxes.
  4. Can my high rent or high EMI be of any use to me? There are provisions in Income Tax that allow you to take benefit of the House Rent Allowance (HRA component) in your salary. It also allows you to take advantage of the Huge EMI you are paying — principal portion under 80C or interest portion under Income from House Property. Find it out.
  5. What records should I keep? In most cases, if you are paying tax on a particular business income, the expense incurred to generate that income will be allowed by the government as a deduction. Keep a record of all your expenses including traveling, stationery, client entertainment bills, internet and phone bills etc. As a professional and even as a business owner, these can be accounted for as expenses for deduction out of your income.
  6. Am I using the tax free slab of Rs. 1 lacs in Long term capital gains(LTCG) income? Investing in shares and dabbling in mutual funds is not just about checking the price of your coveted investment everyday. If you are active in buying-selling, you must also be aware of the taxation of your gains. And how to optimise that so you can use up your LTCG tax-free benefit of Rs. 1 lac per annum to book profits on time.
  7. Which of the Chapter VI-A deductions are available to me? Now that you have your income sorted, it’s time to save tax! Find out if there are any deductions that you are currently not availing of that you can consider incorporating in the next year. Most of us don’t even know that expenses incurred to care for our elder parents are actually tax deductible. Or that random good deed of charity you did is also claimable as expense under tax.
  8. Am I using my 80C limit to the best extent? Under section 80C the government allows you to reduce up to Rs. 1.5 lacs from your taxable income if you invest it in any of the following instruments — Tax saving mutual funds, National pension scheme, Tax saving FDs, Public provident fund and even your office’s Employee Provident fund. The government reduces your tax liability if YOU make investments for YOURSELF, can you believe that? Wait, there’s more — another Rs. 50,000 can be claimed for investing in NPS. But point is, did you do enough to save for yourself in time?
  9. What Do I have to tell you about the gifts I have received this year? It was your birthday — your mom got really emotional and made a Rs. 5 lac FD in your name. Not to worry there, that isn’t taxable. But a far-off cousin got emotional and gifted you 1 Bitcoin? Ahem, that might get you into trouble if you don’t show. So, ask your CA what all needs to be shown for disclosure in your IT returns and don’t get caught off-guard, ever!
  10. What is my Income Tax portal username and password? Log onto https://www.incometax.gov.in/iec/foportal/ and get familiar with the new income tax portal. There’s a good chance your CA has already created an account for you — all you need to do is get the passwords! Make sure all your details — your mobile number, your email address, your bank details are all up to date. This will make it easier for you to track the filing process and maybe even receive any refunds from the department of tax!
The 5 heads of Income (Source: Instaca.in)
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