It is required of every taxpayer to submit their income tax return (ITR). Your annual income is detailed in your income tax filings, together with any tax obligations that must be met. Under several parts of the Income Tax Act 1961, the Government of India offers tax exemptions as well as tax rebates. Five efficient tax-saving strategies have been identified by tax specialists for the fiscal year 2023.
The goal is to encourage individuals to improve their investment levels. The techniques listed below can all be used to reduce your tax obligations.
1 • Invest in tax-saving instruments
Under Section 80C of the Income Tax Act, the Government of India has allowed various tax deductions on the amount invested for certain instruments. On the investments you would have made in these instruments, you are allowed to claim a tax deduction up to a maximum of Rs 1.5 lakh.
Some of the tax-saving ways for investment in 2022 are as follows:
- 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
According to tax experts, investing in the aforementioned plans can help you reduce your tax liability while also increasing your long-term financial security.
2 • Select the precise tax regime
There are now two different taxation systems in place for Indian nationals. You could choose from one of two options when submitting the return. For the most tax savings, it would be essential to have the right tax regimes. The new tax system provides a chance for a lower tax rate, but it does not permit tax deductions. Therefore, you should use the previous tax system when requesting tax deductions under Section 80C of the Income Tax Act. If not, you could choose a different tax structure to reduce your income tax expense. You might use an online income tax calculator to help you compare the new and previous tax regimes.
3 • Buy health insurance for yourself and your family
By acquiring health insurance coverage for yourself and your family, you can also reduce your tax liability. According to Section 80D of the Income Tax Act, an assessee may deduct up to Rs 25,000 from their taxable income for paying the health insurance premiums for themselves, their spouses, and their children. A senior citizen who is a taxpayer under that section may claim a tax deduction of up to Rs 50,000. You might save an additional Rs 50,000 when you get your parent’s health insurance.
4 • Avail of the tax advantages on home loans
If you obtained a house loan from a bank or non-banking financial organization, you are qualified to claim the deductions for loan interest and principal. The largest deductions are permitted under Section 24 and are Rs. 2 lakh for house loan interest and Rs. 1.5 lakh for home loan principal under Section 80C of the income tax.
5• Income tax return filing within stipulated durations
Each year, a person or business must submit their ITR before July 31 or another period specified by the income tax administration. If you are unable to file your income tax return by the deadline, a penalty will be applied. The income tax return must be filed before the deadline in order to be eligible for various benefits, such as home loans, immigration paperwork, greater value transactions, etc.
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At the end of the fiscal year, many people invest in tax-saving instruments for the purpose of saving taxes. The most efficient moment to invest in tax-saving plans, however, would be at the beginning of the fiscal year. You can invest consistently to protect your taxes and increase your wealth using a variety of tax-saving strategies. As a result, you should research the best tax-saving investment strategies and limit your investments to those types of instruments that apply to you.