Managing Income Tax

TABLE OF CONTENTS

• Who is this article for?
• What are Tax Deductions?
• Why are the Deductions provided?
• What are Tax Declarations?
• Type of Deductions available to individuals
• How to setup declaration settings

1. Payroll Admins: This will help you understand how to setup declaration cut off dates and take action on employees' declarations
2. Employees: This will help you understand how to make declarations in Keka
   

To understand tax declarations, let us first understand what are tax deductions.

The Income Tax Act allows for various deductions from the taxable income of individuals. These deductions reduce the taxable income of the employee which in turn leads to a lower tax liability. 

These deductions can be in the form of: 

• Standard Deduction
• Deductions under Chapter VI A of the Indian Income Tax Act (Section 80C to 80U)
• Deduction for specific income like Interest on Home Loans, etc
• Tax exempt allowances

The deductions are meant to incentivise certain investments or expenses that are deemed desirable by the government. 

When an employee chooses to allocate certain part of their income to the tax deductible deductions , he/she can declare the same to their employer to reduce their tax liability and lower the monthly TDS deduction. These are called tax declarations. 

As we discussed in the previous articles, the Indian Tax Act offers two tax regimes: 

1. Old Tax Regime
2. New tax Regime. 

The old tax regime allows for a greater number of deductions, while the new tax regime provides lower tax rates but with fewer deductions. 

Below is table showing some of the tax deductions available under the two regimes: