5 smart ways to save tax in the 2022-23 fiscal year

Each year, taxpayers are required to file their income tax return (ITR). The income tax return includes information on your annual income as well as the tax payable that you must file. Under various sections of the Income Tax Act 1961, certain tax rebates and exemptions have been allowed by the Government of India.

The main aim of the same is to encourage people to invest more. There are distinct ways you can follow to reduce tax expenditures.

Some of the tax saving techniques are:

a) Invest in tax-saving instruments

Under Section 80C of the Income Tax Act, the Government of India allows certain tax deductions on the amount invested for certain instruments. You can claim tax deductions up to a maximum of Rs 1.5 lakh for investments made in these instruments.

Here are some tax-saving tools:

  • Public Provident Fund (PPF)
  • Employees’ Provident Fund (EPF)
  • Equity Linked Savings Scheme (ELSS)
  • National Pension System (NPS)
  • Sukanya Samriddhi Yojana (SSY)
  • Seniors Savings Plan (SCSS)
  • Fixed deposits (FD) of 5 years or more

Not only can you save tax by investing in the schemes mentioned above, but you can also build your long-term wealth.

b) Choose the specific tax regime

At present, there are two tax schemes available for Indian citizens. When filing the ITR, you can choose either. But for maximum tax savings, it is important to select the right tax regime.

The new tax regime offers reduced tax rates. However, it does not allow tax deductions. Therefore, if you are claiming tax deductions under Section 80C of the Income Tax Act, you must opt ​​for the old tax regime. Alternatively, you can choose the new tax regime to reduce your income tax burden.

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If you do not understand the new and the old tax system, you can use the online income tax calculator.

c) Take out health insurance for you and your loved ones

Purchasing health insurance policies for yourself including your family will also help you save tax. Under Section 80D of the Income Tax Act, a taxpayer can avail a deduction of up to Rs 25,000 to pay health insurance premiums for himself, his spouse and children at charge.

Under the same section, an elderly person as an assessee can claim a tax deduction up to Rs 50,000. If you purchase health insurance for your parents aged over 60, then you can claim a deduction of up to Rs 50,000.

d) Ask for tax benefits on the mortgage

If you take out a home loan from a bank or non-bank financial institution, then you can claim deductions from your taxable income for the interest and principal amount of your loan. This Act allows a maximum deduction of Rs 2 lakh under Section 24 in respect of interest on home loan and Rs 1.5 lakh under Section 80C of the Income Tax Act. income with respect to the principal of the home loan.

e) Filing of RTI within specified timeframes

Everyone must file the tax return by July 31 each year or by the date indicated by the income tax department. A penalty will be imposed if you miss or fail to file the ITR within the specified time.

Conclusion

It can be noted that many people resort to panic investing in year-end tax-saving schemes for the purpose of saving tax. But this defeats the main purpose of allowing such deductions to motivate people to invest in the future.

Therefore, the beginning of each fiscal year may be the best time to make tax-saving investments. With this, you will be able to regularly invest in multiple tax saving devices to save taxes and generate wealth. You should educate yourself about all tax-saving investment options and should only invest in instruments that are right for you.

(By CA Amit Gupta, MD, SAG Infotech)

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