What is a tax deduction in India?
- Asked By
- Updated On:28-Jan-2021
- Replies:1
Short Answer
The people of a country pay taxes to the government based on what they earn. However, if you want to reduce your tax, then there are specific ways in doing so. Tax deductions help taxpayers reduce their tax liability towards the government, enabling them to take home more of their earned money.
Detailed Answer
"Tax" seems to be a scary term. Since it requires us to give away a part of our hard earned money.
What’s not realised is that the government functions on these taxes that people pay. The many services and amenities that the government provides, the expenses of them are fulfilled via these taxes only. The government also provides a lot of tax saving provisions which are known as tax deductions.
What are tax deductions actually?
Tax deductions help taxpayers reduce their tax liability towards the government, enabling them to take home more of their earned money.
This means, the government offers different types of deductions. These are influenced by certain factors. Also, the amount varies depending on the type of deduction you plan to claim.
These benefits can be claimed on the expenses that you have incurred and on the investments you’ve made.
So, these investments can include:
- National and retirement savings schemes
- Life insurance plans
- Provident funds, etc.
Now, if you contribute towards certain defined saving schemes, you get a deduction on the total amount of your tax liability. This means, you'll have to pay lesser tax.
Above all, you get dual benefits:
- Tax savings
- Start building a retirement corpus
Simply put, tax deductions are available so that more people claim and enjoy social benefits.
Ask Your Query for FREE, Get quick answers from our FINTRAKK community!
Discussion (0)
Liquid funds, a type of mutual funds which invest in different money market instruments. The withdrawals from these funds are processed within 24 hours and that's why these are regarded as liquid assets. The fund manager gets flexibility to meet immediate redemption requests.
Public Provident Fund Scheme is a saving scheme that comes with tax benefits. Ministry of Finance introduced this scheme in the year 1968. The main objective of PPF is to encourage general people to mobilize their small savings. The interest offered on these schemes are not taxable. Precisely, PPF is an investment with non-taxable returns.
For a salaried class, there are many places where investments done. Know the best investment options for salaried person in India. The best investment options for a salaried person are Gold investments, PPF account, national pension scheme, ELSS, and fixed deposits.
The Government of India has been on the forefront of giving schemes for the Girl Child in India. Are there any post office saving schemes for the boy child in India? I was looking at Ponmagan Podhuvaippu Nidhi Scheme but it seems that the scheme is available only in Tamil Nadu Post Office.
There are mainly 5 types of bank accounts in India. These include Savings account, Current account ,Fixed deposit account, Recurring deposit account and NRI accounts.
Navigating the huge selection of investing possibilities can be a difficult chore for middle-class people.There are a lot of options, ranging from mutual funds and fixed deposits to the National Pension System. This will give middle-class Indians a thorough insight to the finest investing strategies.
Every Equity Investor should maintain some part of their portfolio diversified into foreign companies. This can be achieved through Foreign brokers or Mutual Funds and ETFs that invest in abroad markets. Investing abroad has many benefits such as exposure to the top global companies like Facebook, Amazon, Ford, etc. The tax implications on investments made outside India are different as foreign Equity is taxed as Debt Mutual Funds
Yes, any NRI can invest in mutual funds in India, if they follow some certain conditions under Foreign Exchange Management Act or FEMA Act 1999.
NRIs living in the United States can invest in Indian Mutual Funds, but there are some hassles that have to be overcome. You will require an NRE, NRO, or FCRN account in order to convert the foreign currency into Indian rupees, post which you can complete the KYC and begin investing in Indian Mutual Funds.
We all look to earn good returns on the money we invest. Putting money in High return investments is one way of generating better income. The different places to get good returns are mutual funds, equity, and gold investment in India.