We all want our income to be useful to us, and tax credit can help us with that! But what is a tax credit, how does it benefit us, and how can we claim it? Let’s understand it in simple language!
What is a Tax Credit?
Tax credit is a benefit that can reduce our tax. If we get a tax credit, it means we have to pay less money to the government.
Suppose we had to pay tax of 5,000, but we got a tax credit of 2,000. Now we have to pay only 3,000. That means, less money will go out of our pocket!
Difference between Tax Credit and Tax Deduction
Tax Deduction: It reduces our taxable income.
Tax Credit It directly reduces the amount of tax we pay.
Therefore, the benefit of tax credit is direct and more!
Which tax credits can be availed?
Education Tax Credit If we are studying, then we can get tax credit on some courses and college fees.
Income Tax Credit The government gives tax relief to some people if their income is low.
Energy Saving Tax Credit If we have installed solar panels in our house or have bought some energy saving thing, then we can get tax exemption.
Family and Children Tax Credit Some tax credits are also available on expenses related to child care, education or health.
How do we claim tax credit?
We have to keep a correct record of our income and expenses.
While paying tax, we have to attach the correct form and document.If we are not able to understand, then we can take help from an expert!
Conclusion
By using tax credit properly, we can save our earnings and use our money smartly. Therefore, learning about tax credits and claiming it correctly can be very beneficial for us!
If you liked this information, do share it with your friends!
