In this blog, we will explore the top 10 benefits of tax in India, highlighting how taxes play a role in national advancement, improving living standards and promoting economic progress. Taxes are an essential part of any economy, and in India, they play a vital role in funding government initiatives and standard services. From infrastructure development to social welfare programs, taxes are essential for the growth and stability of a country.
What is the Tax?
Tax is a mandatory financial duty or levy imposed by the government on individuals, businesses or other entities to finance public services, infrastructure and government functions. It is a primary source of revenue for governments, enabling them to maintain the economy, provide public goods and services, and ensure social welfare.
1. Direct Taxes: A tax paid directly to the government by individuals and organizations (e.g., income taxes, corporate taxes).
2. Indirect taxes: levied on goods and services and paid indirectly through purchases (e.g., goods and services tax (GST), excise duties).
What are the Top 10 Benefits of Tax in India?
1. Life Insurance
2. Claiming Refunds
3. Fixed Deposit
4. Address Proof
5. Establishing Losses
6. National Savings Certificate
7. NPS
8. Public Provident Fund (PPF)
9. Visa Application
10. Availing Loans and Credit Cards
To Pay All Types of Taxes Contact Our Expert Legal Adviser
1. Life Insurance
Life insurance is a financial product that provides financial protection to a person’s family or dependents in the event of the policyholder’s death. In some cases, it is also a means of savings and investment, providing a combination of risk coverage and wealth creation.
1. Risk Coverage: Ensures financial security for the policyholder’s family in case of unforeseen events.
2. Premium Payment: Regular payment made by the policyholder to keep the policy active.
3. Sum Assured: The amount payable to the beneficiaries during the policyholder’s death.
4. Maturity Benefits: In savings-oriented policies, the policyholder can receive a payout on the policy’s maturity.
2. Claiming Refunds
Claiming a refund refers to the process by which a taxpayer can request a refund of the excess tax paid to the government. In India, tax refunds generally occur when the amount paid exceeds the actual tax liability due to advance tax payment, excess TDS (tax deducted at source) or incorrect tax calculation.
1. File ITR: Submit your income tax return for the financial year.
2. Verify ITR: E-Verify it or send the signed copy to CPC, Bengaluru.
3. Track refund status: Check refund status on the Income Tax portal or NSDL website.
4. Refund Credit: Once the process is completed, the refund is credited to your linked bank account.
3. Fixed Deposit
Fixed Deposit (FD) is a popular investment instrument offered by banks and financial institutions, where you deposit a lump sum amount for a fixed period at a pre-determined interest rate. It is a safe and reliable option to earn stable returns over time.
1. Fixed Term: You choose the deposit period, which ranges from 7 days to 10 years.
2. Guaranteed Returns: The interest rate is fixed at the time of deposit and the returns are not affected by market fluctuations.
3. Higher interest rates: FDs usually offer higher rates than regular savings accounts.
4. Safety: FDs are considered low-risk investments, especially in reputed banks.
5. Flexible payment options: Interest can be received monthly, quarterly, or on maturity.
4. Address Proof
Address proof is a document that confirms a person’s residential address. It is often required for official purposes, such as opening a bank account, applying for a loan, receiving government services, or registering for utilities.
Identity verification for financial and legal transactions.
Applying for government documents like a PAN card or passport.
Admission to educational institutions.
Installing utility connections.
5. Establishing Losses
Establishing Losses generally refers to identifying, recording and determining financial losses incurred by an individual or organization, usually for tax, accounting or business purposes. In the context of taxes, setting off losses helps determine the amount of loss that can be carried forward or offset against future profits.
1. Business Loss: When expenditure exceeds income.
2. Capital Loss: Loss arising from selling an asset at a price lower than the price at which it was purchased.
3. Operating Losses: Losses arising from the daily operations of a business.
4. Bad Debts: Losses arising from unpaid customer debts.
5. Depreciation: The decrease in the value of assets over time.
6. National Savings Certificate
National Savings Certificate (NSC) is a government-backed savings scheme in India that offers individuals a safe and reliable way to invest and earn returns as well as avail tax benefits. India Post offers it through its network of post offices and is considered a popular choice for conservative investors.
1. Safe Investment: Being backed by the Government of India, NSC offers guaranteed returns.
2. Tax benefits: Investment in NSC offers tax deductions under Section 80C, and the interest earned is also eligible for tax benefits. However, the interest is taxable in the year it is earned.
3. Encourages savings: It promotes long-term savings and encourages financial discipline.
4. Attractive returns: The interest rates offered are generally higher than regular savings accounts, making it an attractive option for conservative investors.
7. NPS
The National Pension System (NPS) is a government-sponsored retirement savings scheme in India. It was launched by the Government of India in 2004 for government employees and was extended to all citizens in 2009. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
1. Investment Options: Equities, Government Securities, Corporate Bonds.
2. Returns: Market linked.
3. Tax Benefits: Deduction up to ₹2 lakh
4. Evacuation: Partial evacuation for emergency; 40% corpus annuity purchase on retirement.
8. Public Provident Fund (PPF)
Public Provident Fund (PPF) is a popular long-term savings and investment scheme in India, started by the government to encourage savings among individuals and provide tax benefits. It is backed by the government, making it a safe and trustworthy investment option.
1. Eligibility: Open to Indian residents; minors can also open an account through guardians.
2. Tenure: 15 years (extendable in 5-year blocks).
3. Investment range: ₹500 to ₹1,50,000 per annum.
4. Interest: Fixed by the Government on quarterly basis; compounded on yearly basis.
5. Tax Benefits: Exempt-Exempt-Exempt (EEE) under Section 80C.
6. Withdrawal/Loan: Partial withdrawal after 7 years; Loan from 3rd year.
9. Visa Application
A visa application is the process through which a person requests authorization to enter, live, or work in a foreign country for a specified period. Visas are issued by the government of the country being visited, usually through its embassy or consulate.
Make sure your passport is valid and has blank pages for visa stamps.
Provide accurate and truthful information.
Submit all required documents to avoid delay or rejection.
Apply well in advance of your travel date.
10. Availing Loans and Credit Cards
Paying taxes and filing ITR can help you get loans and credit cards as proof of income by showing financial discipline. Lenders use ITR to assess loan eligibility, offer higher limits and offer better interest rates. This is essential to qualify for business loans and premium credit cards, especially for self-employed individuals. Additionally, consistent ITR filing increases credibility and supports visa applications, which indirectly increases the chances of loan approval.
Conclusion
The benefits of Tax play a vital role in shaping the growth and success of a country. They form the backbone of sustainable infrastructure, healthcare, education and social welfare programmes that ensure the well-being of citizens. By redistributing wealth and funding essential services, taxes promote monetary stability, reduce income inequality, and promote sustainable growth. Moreover, paying taxes on time enhances financial credibility, helping individuals to access credit, loans, and other economic benefits. A fair and efficient tax system ultimately contributes to a stronger, more inclusive, and self-reliant society.
FAQs
Q1. How do taxes benefit us?
Taxes help us finance public services like healthcare, education and infrastructure, ensure national security and support social welfare programmes. They also help reduce income inequality, promote economic growth and provide financial credibility to access loans and credit facilities.
Q2. What are the benefits of tax system in India?
The tax system in India finances public services such as infrastructure, health care, and education, reduces income inequality, and supports national security and economic development. It also helps individuals to secure loans and credit while contributing to overall social development.
Q3. What is the importance of tax?
Tax is significant because it finances public services, promotes economic stability, reduces inequality, and supports national security and infrastructure development, ensuring overall social welfare.
Q4. Who benefits the most from taxes?
The general public benefits the most from taxes and funding essential services such as healthcare, education, and infrastructure. Low-income groups also benefit through subsidies and assistance programs.
Q5. What is angel tax?
Angel tax is a tax levied on the funding received by startups from angel investors when it exceeds the fair market value of the shares. To prevent money laundering, the difference is taxed as income under section 56(2)(viii) of the Income Tax Act, 1961.
Add a Comment