5 Tax Saving Techniques You Need To Pay Attention To

Every year a taxpayer is needed to file their Income tax return (ITR). The Income tax return includes the information of your annual income along with the payable tax which you need to file. Under different sections of the Income Tax Act 1961, some tax rebates and exemptions are being provided by the Government of India.

The major purpose for the same would encourage people to invest in a bigger way. Distinct ways are there which you can follow for reducing the tax outgo 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 permits some tax deductions upon the invested amount for some instruments. It mentioned that you can claim the tax deduction up to a maximum of Rs 1.5 lakh on the investments made in these instruments.

Below are some tax-saving methods for investment in 2022:

• Public Provident Fund (PPF)

• Employees' 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

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

Choose the specific tax regime

In the present times, there are two tax regimes available for Indian citizens. During ITR filing you can choose either of them. But to have maximum tax savings it is important to select suitable tax regimes.

A new tax regime would propose a lower tax rate however it does not permit tax deductions. Hence if you are seeking tax deductions under section 80C of the income tax act then you must go for the old tax regime, and if not then you can choose the new tax regime to reduce your income tax.

If you are confused about the new and old tax regimes then you can take assistance from the online income tax calculator.

Purchase health insurance for yourself and your loved ones

Buying health insurance policies for yourself including your family will also make you save the tax. Under section 80D of the income tax act, a taxpayer can avail of a deduction of up to Rs 25,000 for paying the health insurance premiums for themselves, their spouses, and dependent children.

Under the same section, a senior citizen as an assessee can claim a tax deduction up to Rs 50,000. If you would pay health insurance for your parents then you could save an additional amount of Rs 50,000.

Claim tax benefits on home loan

If you take a home loan from any bank or non-banking financial institution then from your taxable income you are eligible to claim the deductions with respect to your loan's interest and principal amount. This law permits maximum deductions of Rs 2 lakhs under section 24 with respect to the home loan interest and Rs 1.5 lakhs under section 80C of the income tax with respect to the home loan principal.

ITR filing within specified timelines

Everyone needs to file the Income tax return before 31st July every year or the date specified by the income tax department. A penalty will be levied if you miss or fail to file the ITR within the specified timelines.

The same would assist you to file the ITR within the due date since it is important for additional objectives, like taking a housing loan, applying for immigration documents, conducting high-value transactions, and others.

Conclusion

To save the tax various people used to invest in tax saving schemes in panic at the end of the fiscal year. But the same will lead to the failure of the main objective of permitting such deductions to motivate people for investing in the future.

Hence the start of every calendar year or fiscal year will be the best time to make tax-saving investments. Indeed you are able to invest regularly in multiple tax-saving ways to secure the taxes and make wealth. You must learn about all the tax-saving investment options in the correct way and you should invest only in those types of instruments that are appropriate.

Authored by Amit Gupta, MD, SAG Infotech