Income Tax Benefit ( A Comprehensive Guide)

You are liable to pay your income tax based on your annual income. You will fit in any income tax slabs formed by the income tax department and be liable to pay tax. The income tax slab rates may vary every year. The income tax department changes these rates depending on the country’s financial status. 

These changes will be announced in the annual budget every year, and after is passed by parliament, they will go into effect. The income tax slabs came into existence to provide equality in paying taxes among people.

However, you may have tax benefits under various sections of the income tax act. They help you save your hard-earned money from paying taxes.

Be aware of the various benefits available and your eligibility to claim them. Let us dive deep into income tax benefits.

What Are the Benefits of Income Tax?

There are five types of income tax benefits available. They are Exemption, Deduction, Rebate, Allowances, and Indexation. 

Let us know more about them.

1. Exemption

You need not pay any tax on such income. This income includes interest from PPF, home loans, and REC tax-free bonds. They are fully exempt from tax.

2. Deduction

You can claim deductions for investments under Section 80C up to Rs 1,50,000. Other deductions available are mediclaim for self/parents under Section 80D, interest on the loan for the higher education of self/relative under Section 80E, and donations made under Section 80G are deductible from the taxable income.

3. Rebate

You can receive a rebate after computing your income tax. It reduces your actual tax payable if you have made a specific investment. You can get your returns within the stipulated time.

4. Allowances

You can receive allowances in addition to your salary. It helps to meet specific expenses. Common allowances include Dearness Allowance, House Rent Allowance, LTA, education, medical, transport, etc.

5. Indexation

Indexation adjusts the purchase price of your investment to reflect the effect of inflation on it. It helps to lower long-term capital gains, which reduces taxable income.

These are the several types of income tax benefits you can enjoy.

How Can I Get Tax Benefits on My Salary?

If you are a salaried person, you must know your income tax slabs and the components of your salary before filing your income tax returns. It will help you figure out how to save on taxes. You need to understand the available deductions and the tax benefits on your salary.

The tax benefits available on your salary are,

1. House Rent Allowance

If you live in a rented house, you can claim HRA. It helps lower your taxes.

2. Leave Travel Allowance

If you travel within India, you can avail of an exemption for the trip under the LTA. It is only for the shortest distance on a trip. You can claim this allowance only for the trip with your spouse, children, and parents. 

3. Provident Fund

Your contribution to the provident fund is exempt from tax. The returns from this fund at maturity are also tax-free.

4. Standard Deduction

The standard deduction is Rs.50,000, and you can claim this with ease as it is available to all.

5. Exemption under Section 89(1)

If you got any arrears or advance amount as salary, it comes under tax relief. 

These are some of the options through which you can get tax benefits from your salary.

What Benefits Do Taxpayers Get in India?

If you file your income tax as per the government norms, you enjoy benefits both personally and publicly.

Personal Benefits:

1. Visa Application

Your visa process to any country becomes easier if you have your ITR document with your Visa documents. It shows your authenticity, responsibility, and financial status. The chances for your visa application to get rejected are lower if you possess an ITR document.

2. Address Proof

Your ITR document acts as a reliable address proof for all other actions. Common identity cards like Aadhar, PAN, License, etc., need address proof, and you can use your ITR for that.

3. Loan Application

If you avail of a loan, either Home Loan or Car Loan, your ITR form is the crucial document needed. Your loan process becomes a cakewalk with your ITR document. It is your income proof, and it is most required by the loan officials, to know your financial status and ability to repay the loan. If you didn’t submit your ITR document, it raises a question among bank officials regarding your income and responsibility.

4. Losses

If you file your ITR, you can claim your losses from the previous year. This helps reduce your taxable income for the current financial year.

5. Evidence

Your ITR form is authentic evidence of your income and other financial transactions. The Income Tax Department may require this evidence of your income in certain situations.

There are several other personal benefits available if you file your taxes in India.

Public Benefits:

Apart from the above benefits, paying income tax also helps the growth of the nation.

1. Public Infrastructure

Construction of transport infrastructure, Government institutes, public places, smart cities, etc. takes place with the help of taxes paid by the taxpayers in India.

2. Welfare Schemes

Government launches various welfare schemes throughout the country, from health, education, housing, and unemployment, to food programs. Your Income tax is the primary source of funds for such schemes.

3. Scientific research and defence

Space missions and scientific inventions happening in India require funding regularly. Your income tax money is the main source for all these actions.

The Government also uses your tax money,

• Rendering essential needs like energy, water, power, waste management, etc.
• Government operation
• Salaries of Government and state employees
• Pension schemes
• Law enforcement

These are the various benefits that taxpayers get in India.

FAQs: Income Tax Benefit

What is the 80C tax benefit?

Section 80C is applicable if you are an individual taxpayer or HUF. The maximum deduction under this section is Rs1.5 Lakh. You can claim this deduction from your salary every year while filing your returns. 

Corporate bodies, partnership firms, and other businesses are not eligible for tax benefits under Section 80C.

What is an 80D tax benefit?

Under section 80D, you can claim deductions on health insurance premiums paid for yourself, your family, and your parents. You can claim this separately from deductions for expenses related to health check-ups.

The maximum limit under this section is Rs.65,000, subject to conditions. 

You can deduct the premiums you pay for health insurance for yourself and your dependents under this section. 

Who is eligible for tax benefits?

If you are liable to pay tax under the income tax act, you are eligible for tax benefits too.

If your annual income is above Rs.2.5 Lakhs, you are liable to pay income tax based on the income tax slab that applies to you. 

However, you can enjoy the various tax benefit options available and thus reduce your total taxable income. Make the most of these benefits and save your money.

How much tax benefit can I claim?

The maximum tax benefit that you can claim is Rs.1.5 Lakhs. You can claim these benefits under Section 80C and other sections. However, the maximum limit for this is Rs.1.5 Lakhs, though you are eligible for more deductions.

Bottomline

As you can see from this article, there are numerous income tax benefits available. Take advantage of these benefits and save your hard-earned money. In addition, don’t forget to pay your income tax at the stipulated time, as it shows your civic responsibility. Enjoy these benefits while paying yours.

Kindly let us know if you have any concerns regarding tax benefits.

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