How to plan your income to pay minimum Taxes on the income?
Before we start its adviced to go through this post by Rahul Rai - To do and avoid things while planning your Income Taxes.
In India income tax act covers almost all sources income. The incomes are devided in 5 major heads. Income from Salary, Income from House Property, Income from Capital Gains, Income from Business and Profession and Income from Other sources.
The various tax exemptions and deductions are available while calculating the taxable income under the respective heads.
Chapter VIa deductions are available over and above the deductions available under different heads.
Tax planning is different from tax avoiding. The tax can be planned under different heads by following ways:
- Income from salary: Tax can be planned by deviding the salary in different heads. Salary should be devided in different parts, example conveyance, HRA, different allowances which are tax exempted etc. For government employees entertainment allowance is exempted upto 5000.
- Income from House Property: House property if owned is chargeable to taxes. The deduction under section 24b is available to all assessees. Section 24b provides deduction of Interest payable on loan taken for house property.
Treat the house property in a manner which provides maximum tax benefits.
- Capital Gains: different investment options are available to manage the taxes.
- Income from Other sources: This head was one the most used head to avoid the tax, but government took steps to control the tax evasion to some extent. The tax planning can be done under this head by accepting gifts through relatives.