As the end of the financial year approaches, it’s essential to begin thinking about filing your taxes. The Indian tax system can be complicated, but with the help of an income tax calculator and a step-by-step guide, even beginners can easily calculate their taxes. Additionally, understanding home loan tax benefits and the necessary home loan documents will also make the process smoother.
Step 1: Gather Required Documents
The first step in calculating your taxes is to ensure that you have all the necessary documents. These may include salary statements, bank statements, investment proofs, and rent receipts, among others. Moreover, if you have taken a home loan, you must have relevant home loan documents such as loan agreement, repayment schedule, and interest certificate.
Step 2: Calculate your Gross Income
Your gross income includes all of the money you have earned or received in a financial year, including salary, rent from property, and any interest earned from savings accounts, fixed deposits, or investments. Add up all these amounts to get your gross income.
Step 3: Deduct Tax Deductible Investments and Payments
The next step is to deduct all the tax-deductible investments and payments you have made during the year. These may include investments in Public Provident Fund (PPF), National Pension System (NPS), Equity-Linked Savings Scheme (ELSS), and life insurance premiums.
Moreover, if you have taken a home loan, you are eligible for several home loan tax benefits. The principal amount and interest paid on home loans qualify for tax deductions under Section 80 C and Section 24 of the Income Tax Act, respectively.
For instance, if your home loan is for Rs. 50 Lakh at an interest rate of 8%, your total interest paid for the year would be approximately Rs. 4 Lakh. According to Section 24, you can claim a deduction of up to Rs. 2 Lakh for interest paid on a home loan for a self-occupied property. Furthermore, a deduction of up to Rs. 1.5 Lakh can be claimed for the principal amount paid under Section 80 C.
Step 4: Calculate Taxable Income
After deducting all the tax-deductible investments and payments, you will get your taxable income. You will then use an income tax calculator to calculate the tax payable on this amount.
Step 5: Calculate Tax Payable
The next step is to use an income tax calculator to calculate the tax payable on your taxable income. An income tax calculator is a simple tool that helps you calculate your taxes based on the latest tax slabs.
Step 6: Claim Tax Deductions and Rebates
Before finalizing your tax return, ensure that you have claimed all tax deductions and rebates that you are eligible for. Apart from home loan tax benefits, you may also qualify for deductions such as medical insurance premiums, education loan interest payment, and donations to charitable organizations. Additionally, if you are a senior citizen or a woman, you may be eligible for a higher rebate on your taxes.
Step 7: File Your Tax Return
Once you have calculated your tax payable and claimed all deductions and rebates, it’s time to file your tax return. You can file your taxes online or offline depending on your convenience. Keep in mind that the deadline for filing your tax return for the financial year 2020-21 is 31st July 2021.
Conclusion
In conclusion, calculating your taxes may seem daunting, but with the help of an income tax calculator and a step-by-step guide, you can easily calculate your taxes, claim deductions, and file your tax returns. Additionally, if you have taken a home loan, understanding the relevant home loan documents and home loan tax benefits will help you save on your taxes. So, start early, gather all the necessary documents, and use an income tax calculator to make the process smoother and stress-free.
