5 tax-saving techniques you need to pay attention to

Each year, a taxpayer must file his 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 are granted by the Government of India.

The main purpose of the same would be to encourage people to invest more. There are distinct ways you can follow to reduce tax expenditures, some of them are:

Some of the tax saving techniques are:

  • 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. He mentioned that you can claim the tax deduction up to a maximum of Rs 1.5 lakh on investments made in these instruments.

Here are some tax-saving methods for investing in 2022:

  • 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

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

  • 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 to have maximum tax savings, it is important to select appropriate tax regimes.

A new tax system would offer a lower tax rate, but it does not allow tax deductions. Therefore, if you are claiming tax deductions under Section 80C of the Income Tax Act, you must elect the old tax regime, and if not, you may elect the new tax regime to reduce your income tax.

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

  • Take out health insurance for you and your loved ones

Purchasing health insurance policies for yourself, including your family, will also save you 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, 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 pay for health insurance for your parents, you could save an additional Rs 50,000.

  • Benefit from tax advantages on your mortgage

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

  • Filing of RTI within the specified deadlines

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.

The same would help you to file the ITR on time as it is important for other purposes like taking out a home loan, applying for immigration documents, performing high value transactions, etc.

Conclusion

To save tax, various people used to invest in tax saving plans in a panic at the end of the tax year. But this will defeat the main purpose of allowing such deductions to motivate people to invest in the future.

Therefore, the beginning of each calendar or fiscal year will be the best time to make tax-saving investments. Indeed you are able to invest regularly in multiple means of tax savings to secure taxes and make a fortune. You should educate yourself properly about all tax-saving investment options and you should only invest in the appropriate types of instruments.



LinkedIn


Disclaimer

The opinions expressed above are those of the author.



END OF ARTICLE


  • An Unfinished Journey: [email protected] has a lot to celebrate, but the full range of freedoms available to elites eludes most

  • India is, finally, on the road to recovery: we can’t grow more than 5% a year, but that’s still good in a slowing global economy

  • Bilkis case: Those who deserve a noose shouldn’t be garlanded

  • At 75, India needs to talk: Some of our problems need dialogue, between parties, between communities, between ideologues

  • Safran Research for the Muslim Vote: BJP’s outreach to Pasmandas is electorally and ideologically smart, but it won’t be smooth sailing

  • Spot the Obscenity: University that fires professor for private photo in swimsuit, teaches very twisted lessons

  • Surrender error: Gujarat government had more than enough grounds not to release Bilkis convicts

  • A history of private successes and public failures: unless it corrects its institutions, India will not become a developed nation in 25 years

  • Will we get rich? Per capita income will be in the richest 10% of all economies

  • GDP and Our Judges: Courts Intervene in Economic Policy Matters in a Costly Way for India

Comments are closed.