Wealth Guide – Income Tax Saving Tips: Every year, a taxpayer is required to file their Income Tax Return (ITR). The income tax return contains the information of your annual income along with the tax payable that you need to file. In various sections of the Income Tax Act 1961, the Government of India grants some tax rebates and exemptions. Amit Gupta, MD, SAG Infotech suggests 5 smart tax saving techniques for FY23.
“The main purpose for the same would encourage people to invest on a larger scale. There are several avenues you can follow to reduce tax expenses. Some of them are:
Some of the tax saving techniques are:
SMART TIP 1 • Invest in tax-saving instruments
Under Section 80C of the Income Tax Act, the Government of India allows some tax deductions on the invested amount for some instruments. It has been mentioned that you can claim the tax deduction up to a maximum of Rs 1.5 lakh on investments made in these instruments.
Below are some tax saving methods for investing in 2022:
• Public provident fund (PPF)
• Employee Provident Fund (EPF)
• Equity Linked Savings Scheme (ELSS)
• National Pension System (NPS)
• Sukanya Samriddhi Yojana (SSY)
• Senior Citizen Savings Scheme (SCSS)
• Fixed Deposits (FDs) of 5 years or more
Not only can you save on your taxes by investing in the above schemes, but you can also build your long-term financial wealth,” suggested Amit Gupta.
SMART TIP 2 • Choose the specific tax system
“In modern times, there are two tax regimes available to Indian citizens. You can choose one of these during the ITR filing. However, in order to achieve maximum tax savings, it is important to select appropriate tax systems. A new tax system would propose a lower tax However, this tax rate does not allow tax deductions. So if you are claiming tax deductions under Section 80C of the Income Tax Act you must opt for the old tax regime and if not you can opt for the new tax regime to reduce your income tax. If you are confused about the new and old tax rules, you can take help from the online income tax calculator,” he said.
SMART TIP 3 • Take out health insurance for you and your loved ones
“By purchasing health insurance policies for yourself, including your family, you can also save on taxes. Under Section 80D of the Income Tax Act, a taxpayer can claim a deduction of up to Rs 25,000 for the payment of the health insurance premiums for himself, his spouse, and dependent children. Under the same section, a senior can apply for a tax deduction of up to Rs 50,000 as an assessee. If you paid for your parents’ health insurance, you could save an additional amount of Rs 50,000,” he said.
SMART TIP 4 • Claim tax benefits on a home loan
“If you take out a home loan from a bank or non-bank financial institution, you are entitled to a deduction from your taxable income for the interest and principal on your loan. This law allows maximum deductions of Rs 2 lakhs under section 24 in relation to the home loan interest and Rs 1.5 lakhs under section 80C of income tax in relation to the home loan amount,” he added.
SMART TIP 5• ITR filing within specific deadlines
“Everyone must file their income tax return before July 31 or the date set by the Income Tax Department each year. A penalty will apply if you fail to submit the ITR within the specified time limits. The same would help you in filing the ITR within the due date as it is important for additional objectives such as taking out a home loan, applying for immigration documents, completing high value transactions and others,” he explained.
“In order to save on taxes, various people frantically invested in tax saving programs at the end of the financial year. But the same will result in missing the main goal of allowing such deductions to motivate people to invest in the future. Therefore, the beginning of each calendar year or fiscal year is the best time to make tax-saving investments. In fact, you can regularly invest in several tax-saving ways to save taxes and build wealth. You need to be careful about all tax-related investment options and you should only invest in the appropriate instruments,” he concluded.
(Disclaimer: The views/suggestions/advice expressed herein are those of investment professionals only. Zee Business encourages its readers to consult with their investment advisors before making any financial decisions.)