To avoid last-minute hassles, it is always good to plan taxes and loans in advance.
Sep 15, 2017 06:29 PM IST | MoneyControl.com
In order to avoid any last minute hassles while filing your tax returns, you need to ensure that you plan your taxes in advance. If you have the right foresight and plan your loans and taxes properly, then you can surely save a lot of money.
Here are some key details on planning your taxes and loans…
There are a few components which can help in bringing down your tax liability. For this, you need to reallocate your salary. Like medical expenses which are reimbursed by the employer, certain food coupons, house rent allowance, leave and travel allowance etc., should be used efficiently to bring down your tax liability.
Proper use of tax exemption
There are several tax saving options under 80C and 80D. Under 80C, you have options like NSC, PPF, a premium of life insurance, 5-year FD with banks and post office etc. 80D includes premium paid in Mediclaim policies.
Your tax plan and financial plan must go hand in hand
Your tax-saving plan has to be in tandem with your financial plan. Opt for tax-saving options which will contribute to achieving your financial goal.
The loan factor
There are loans which can actually help in reducing your tax burden. So, you should ensure that you make use of this benefit to the maximum.
Exploiting the loan factor:
If you are planning to take a home loan for buying a home, then restructure it in the best possible way as it can give you tax benefits. Under Section 80C, the principal repayment of housing loan can give you a deduction of up to Rs 1,50,000 and under Section 24B, the interest paid on a housing loan can get you a deduction of up to Rs 2,00,000.
Now, if the home loan amount is huge, then it may cross the tax exemption limit. In such cases, you can opt for a joint loan with spouse or parents or siblings. This will help both the individuals to get the tax benefit. It, thus, becomes a useful tax-saving option for the entire family. It should be noted that stamp duty and registration charges that are paid while transferring the property are also eligible for income tax deduction under the Section 80C.
If you take a loan to buy a second home, then to you can get the advantage of tax deductions under Sections 80C and 24B. Under Section 80C, the principal loan amount will be considered and under Section 24B, the interest paid towards the loan will be considered.
Education loan can also be taken for self or for your spouse or children. You can get tax benefits if you take the loan from a scheduled bank or a notified financial company. You can easily claim a deduction for payment of interest. The tax benefits can be enjoyed for a maximum period of eight years or on the term of the loan repayment.
Personal loans also come with the tax advantage. Personal loans which are taken for renovating or repairing home are helpful. Personal loans taken to make down payment of home loan will also give you the advantage of tax benefit.
To sum up…
Thus, there are different ways and means of reducing your tax liability. Loans give you the dual advantage. They take care of your financial needs i.e., buying a home or higher education of your children and at the same time, they also give you the much needed tax-benefit. So, explore all the pros and cons of the various loans and use them to plan your taxes effectively.