18 Easy Money Tax Tips for Year-Round Savings

Easy Money Tax Tips for Year-Round Savings

In today’s world, it is not straightforward to conduct business, both as a seller or a buyer. There are so many pitfalls that you need to watch out for before you can earn some pennies over your invested dollar. Tax laws have evolved and now studied as a specialized field. It means you should leave all the legal issues to the experts. If you are not genuinely interested in the tax field, then it would not be easy to crack your way in. There are chances of paying a lot of extra money to the government if you do not know about tax saving tips.

For the USA business owners or anywhere around the world, this article will help you in avoiding over-paying the tax each year. This comes in handy for the startups that have just started in these turbulent times.

For your convenience, we have split this article in different segments based on the income stream or tax payable stream so that you can follow it easily.

1. Income from House

Claim Benefits of Interest on Housing Loan

the tax point of view, it would be beneficial to avail it. In this way, you can claim the interest as a deduction on your house and also claim principal as a deduction.

When you equate gross value for tax purposes as NIL, this will allow you to claim deduction as a as a loss under the heading “income from house property”. In the end, you will have less payable tax at the end of a fiscal year.

Paying Municipal Taxes By Cheque

When you make a payment through a cheque, you can make it as a deduction on the house income. In this case, even if you have misplaced the receipts, you will have a proof of paying through bank statements.

2. EarningsFrom Business Or Work

Proper Recording Of Cash Expenses

There are many businesses in the country that are labor-intensive. Often, they dispense salaries in cash which went unreported in the tax files. This results in over-recording of the income which directly results in higher taxes payable.

Valuation Of Stock

In general business practices, stock is valued at the cost. This could end up under-recording the expense for the items that have short shelf life. For such items, there are protocols like Principle of Cost or NRV or whichever is the lower. NRV stands for net realizable value of the stocks.

Depreciation

To manufacturing enterprises in the economy, Income Tax Act provides a cover with multiple benefits.

Imagine that a company has bought a piece of machinery and filed normal 15% depreciation but forgot to claim the additional 20%. It means that the company had paid 20% more. This way, the company has paid more tax and missed out on the additional depreciation allowed in the first year.

Deduct Tax At The Source

In the course of conducting business, there are many payments that the Income Tax Code prescribes to the taxpayers to report the tax at the source. If one is unable to do so, there is extra tax burden on the company.

Cash Payments

You should be aware of the cash payments around 20k to a single entity in the same day. If you exceed this limit, you would end up getting extra payable tax at the end.

Deductible Income in Other Heads

Indirect incomes like interest are deductible in other heads but can be saved from extra burden when reported in other sections. This way, you will get more relief by just reporting the same thing but under a different heading.

Filing Returns on Time

It goes without saying that falling back on the tax payments may cause additional expenses in the forms of penalties and fines. To avoid this, make sure to keep your books in order throughout the year to avoid frustration.

3. Income from Capital Gains

Long-Term & Short-Term Capital Gains

There is a difference between short term and log term gains when it comes to capital gains. There is different assigned tax value to both. So, it is important to keep in mind the difference when reporting the two.

Claim Indexation

This idea is based on the devaluation of money over time. This is extremely helpful while selling long held equities or properties. By going through indexation, you can get a smaller value for the taxable wealth.

Mutual Funds SIP

Just like short-term and long-term gains, there is a difference between the tax accrued on the mutual funds structure. Since, the brokers do not explain this to you, it is better to consult your tax consultant to avoid over burden.

Life Insurance Premium

This is a cover that you get for your loved ones in case of a mishap or medical emergency. There is always a cap for life insurance premium if you need to pay it off. The best way to do it is by consulting with a tax counsel.

Investment In Funds

This type of investment is covered in the long-term gains and have their own set of rules for the payable tax.There are instances where people over-report the gains and get more tax payable.

Always Hire An Expert

There are things that are not our cup of tea. This is the reason why you should always look for a professional tax lawyer to sort your things out. Chartered Accountants are also considered to be the finest people to file your tax returns.

Keep an Eye On Recent Developments

Legislations often pass in the parliament that would change the way things run in the tax sphere. To avoid any unpleasant surprises, it is best to be aware of the new laws and regulations in this sector. Of course, if you hire a professional, you are taken care of.

Know About Penalties & Fees

Many people have to pay penalties because of the missing crucial deadlines on submitting tax files and other paperwork. Make sure you and your tax officials are on the same page and forward everything before the due date.

Exemption from Gains

There is are exceptions to this category as well, especially if you re-invest the gains back in the cycle. Having latest updates on the working of this sector can save you from over-paying the taxes.

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About the Author: Ranjit Ranjan

More than 13 years of experience in web development projects in countries such as US, UK and India. Blogger by passion and SEO expert by profession.