Few Tax jargons you must know in your new job
It’s a new year and it brings with it lots of hope. There is a same feeling, when you start a new job. It is an overwhelming experience, especially if it is someone’s first job. You have no idea of knowing if you’ll get along with your new colleagues, meeting your boss’s expectations and performing up to you best. All of these can add up to your anxiety and make a new job daunting.
Adding to this mix are all the procedures that one has to deal with at the time of starting a new job. There are various documents that have to be understood as well. You already have your work-related aspects to understand, the job-related procedures and documentations are something you would rather procrastinate. But things can be simplified if you master the daily use jargons which are useful in managing taxes and as well as your finances.
Know your PAN
Your PAN number records all financial transactions taking place in your name. You’ll need to furnish your PAN details when making major financial purchases. If you have not applied for PAN, kindly do so immediately by visiting TIN NSDL website
Understand your PAY SLIPS
Your Pay Slip contains your salary details and the amount of tax & PF deducted. It is good to preserve all pay slips you receive from your company.
If Salary is the primary source of your income, your Returns shall be fairly simple. In addition to salary, you’ll have to pay tax on interest gained on FD/ Bank Savings (exempt up to Rs. 10000) The commonly claimed deductions are:- Life Insurance Premium, Medical Expenses, Donations to charitable organizations.
Is TDS tedious?
No, it’s called as Tax deducted at source. Your employer deducts tax from your income & credits to the government’s account.
Income Tax Slabs
The Income Tax Department doesn’t tax everyone at the same rate. How much tax you pay depends on how much income you earn. There are predefined income tax slabs and the tax rate is calculated on the basis of these slabs. These slabs are as below:
Up to Rs.2.5 lakhs
Rs 2.5 lakhs to Rs. 5 lakhs
Rs 5 lakhs to Rs.10 lakhs
Rs 10 lakhs and more
Income tax returns (ITR) FORMS
The most commonly filed ITR is the ITR 1 or Sahaj form for salaried individuals. Apart from salaried income, ITR-1 also includes income from house property and income from other sources, except lottery and winnings from race horses.
How to fill your income tax return:
To fill your ITR, it good to have following things ready
- Form 16
- Income tax E-filing login ID/ Password
- Investment details (LIC, PPF etc.)
- Home Loan Details
Once the return is filed, the ITR V has to be generated and sent to CPC for verification. Else, an e-verification can also be done.
The form 16 has all information needed to file your returns. You might get this separately as Part A and Part B. Part A contains details of TDS deducted by your employer and Part B contains salary and investment details you’ve declared to your employer.
What about Deductions?
Certain expenses and investments can be deducted from your taxable income. You need to plan your investments to claim maximum deductions.
Know Section 80C
You can save up to ¿1.5 lakh in taxes by claiming deduction under section 80C. Certain investment and expenses you make are exempted from tax.
ELSS – TAX SAVING MUTUAL FUNDS
These are tax-saving mutual funds. ELSS funds have a lock-in period of 3 years and invest a majority of their portfolio in the stock market.
MEDICAL INSURANCE (SECTION 80D)
Section 80D benefit is now increased from Rs.15,000 to Rs. 25,000. The deduction for senior citizens is raised from Rs. 20,000 to Rs. 30,000.
INCOME FROM HOUSE PROPERTY
Home owners can claim deduction of up to Rs.2 lakhs on their home loan interest. If you have rented out the property, the entire interest on the home loan is allowed as a deduction.
CAPITAL GAINS AND LOSSES
Capital Assets include land, building, house property, vehicles, patents, trademarks, lease hold rights, machinery and jewellery. Assets owned by you for less than 3 years (1 year in the case of shares) fall under the category of short term assets and vice versa.
Make sure you avoid paying double tax on your income which is taxable in two countries.( especially for IT professionals who work on assignments in other countries). Double Tax Avoidance Agreements (DTAAs) help you get over double taxation.
The Form 26AS gives a consolidated view of the TDS entries. You can verify all entries from any invoice/ pay slip from your Form 26AS. The ’AS’ in FORM 26AS stands for Annual Statement.
Keep yourself informed on the dates and comply with the deadline to pay your taxes and file your returns.This is the key to have a tension free start to your career.
To know more on Tax solutions, visit: https://www.yesbank.in/taxsolutions
*The full version of this article by our knowledge partner Cleartax can be accessed at Cleartax.in