9 ways to save money on taxes while also improving your financial health

9 WAYS TO SAVE MONEY ON TAXES WHILE ALSO IMPROVING FINANCIAL HEALTH

Here are nine strategies to save money on taxes and enhance your overall financial health.

1.INVESTING IN TAX-AVOIDANCE VEHICLES

The government has offered specific tax deductions on sums invested in designated instruments under section 80C of the Income-tax Act of 1961 to encourage residents to save. The following are some of the most common tax-advantaged specified investment instruments:

  • Provident Fund for Employees (EPF)
  • PPF stands for Public Provident Fund (PPF)
  • Deposits that are fixed (tenure of 5 years or more)
  • Policies for life insurance
  • ELSS mutual funds are a type of mutual fund that invests in
  • Pension systems such as the National Pension Scheme (NPS) and others

Investing correctly in these products can help you reach your financial goals while also saving money on taxes (up to a ceiling of Rs 1.5 lakh per financial year). However, tax savings will only be possible if a person chooses the previous tax system. Many of the tax deductions and exemptions available under the old tax regime, such as the section 80C benefit, will be lost if one chooses the new tax regime, which offers lower tax rates. Those who have chosen the new tax regime should keep in mind that investing in the above products will only help them achieve their financial goals, not save money on taxes.

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2.SELECTION OF RELEVENT COMPONENTS IN THE EMPLOYER’S WAGE STRUCTURE

If you are a salaried employee, you can assess the wage structure supplied by your employer and choose the components of your salary that will help you maximise your tax benefits. For example, if you pay rent, you can get House Rent Allowance (HRA), phone/internet expenditure reimbursements, education allowance, food vouchers, and so on. As a result, when calculating taxable income, suitable deductions/exemptions can be claimed (as per the specified conditions).

3.INCREASED CONTRIBUTIONS TO RETIREMENT FUNDS

If the investment limit of Rs 1.5 lakh is not reached, salaried individuals can consider making additional contributions to the ‘Voluntary Provident Fund’ in addition to EPF. Subject to certain conditions, this additional donation will also be deductible from taxable income. Furthermore, the employer’s payment to NPS (limited to 10% of income) will be deducted from the employee’s pay.

Keep in mind, however, that an employee’s individual contribution to EPF and VPF cannot exceed Rs 2.5 lakh in a financial year; otherwise, income tax will be due on the interest accumulated on the excess provident fund contributions.

4.HOME LOAN TAX ADVANTAGES 

If a housing loan is taken out from a financial institution such as a bank, a non-bank financial company (NBFC), or a housing finance company to purchase or construct a home, the interest and principal paid on the loan can be deducted from taxable income, subject to certain limits set by the tax laws. However, tax savings can only be claimed if the old tax regime is chosen. Keep in mind that the deduction for principal payments is limited to Rs 1.5 lakh altogether under Section 80C.

5.HAVING HEALTH INSURANCE TO PROTECT ONESELF

Deductions for health insurance premiums paid for the self, spouse, dependent children, and dependent parents are allowed under the tax code. As a result, one can purchase health insurance for oneself and family members to help manage medical bills in the event of a medical emergency while also receiving tax benefits for the premiums paid (Rs 25,000 for self, spouse and dependent children; Rs 50,0000 for senior citizen parents, as applicable).

Senior adults can also claim a deduction of up to Rs 50,000 for medical expenditures incurred throughout the year if they are not covered by any health insurance coverage.

Have you submitted your tax return? Here’s how to double-check it.

6.TAKING THE PROPER DEDUCTION FOR EXPENDITURES, TUITION FEE AND OTHER EXPENSES

It’s worth noting that in some cases, even if no new investment is made, tax benefits can be obtained in conjunction with specific expenditures, such as Rs 5,000 for preventative health check-ups. However, the deduction for medical expenses is limited by the overall maximum set forth in section 80D, which includes the above-mentioned health insurance premiums. Parents can also claim a tax deduction for tuition fees paid for their children’s education up to Rs 1.5 lakh under section 80C (within the overall maximum of Rs 1.5 lakh).

7.TAX RETURNS MUST BE FILED WITHIN THE TIMEFRAMES STARTED

It is impossible to overstate the importance of filing income tax returns and other statutory paperwork (where applicable) within the prescribed deadlines. The same aids in the creation of a correct tax record that may be used in the event of a tax investigation or verification by the authorities. In addition, filed income tax returns (ITR) must be submitted for a variety of reasons, including applying for immigration documents, home loans, loss carryovers, and certain high-value transactions. As a result, it is critical to file one’s ITR within the specified timeframes in order to avoid incurring interest or penalties.

8. A NEW TAX POLICY THAT IS MORE LENIENT

From FY 2020-21 onwards, the government will implement a new simplified optional personal income tax regime.

Individuals and HUFs will be allowed to pay taxes at reduced slab rates that are applicable without certain exemptions and deductions if certain requirements are met. As a result, one can compare the tax payments under the old and new tax regimes and choose the regime that is more tax advantageous.

9.THE NEED FOR DOCUMENTATION

While no papers are required to be uploaded when e-filing ITR, for a hassle-free engagement with the appropriate authorities, one should keep adequate records of investments made, such as PF account statements, passbooks, copies of insurance policies, pension plans, bank statements, and so on.

Step-by-Step Guidelines for Logging In and Filing ITR using the New Tax e-filing Portal

Step-by-Step Guidelines for Logging In and Filing ITR using the New Tax e-filing Portal

All Indian taxpayers who are required to pay income tax must file their returns by the end of this month, December 31, 2021. Today is December 1st, which is precisely a month away. The Income Tax Return (ITR) must be filed for the Financial Year 2021-22, or taxpayers could face serious consequences. The government created an e-filing system earlier this year, allowing citizens to complete income tax returns online from the convenience of their own homes. However, in order to use the services, the user must first check in to the income tax e-portal.

The portal, which went live on June 7, was far from “taxpayer-friendly.” “to summarise Users reported a number of issues with the e-filing portal. Following that, Union Finance Minister Nirmala Sitharaman issued summonses to Infosys and given a deadline of September 15 to resolve the issues. The Incomme Tax Department later extended the deadline for this notice, which had been set for September 31. “The due date for furnishing a return of income for the Assessment Year 2021-22, which was 31st July 2021 under sub-section (1) of section 139 of the Act, as extended to 30th September 2021 via Circular No.9/2021 dated 20.05.2021, is hereby extended to 31st December 2021.” “In a statement, the Central Board of Direct Taxes (CBDT) said.

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In October, Infosys announced that it had fixed 90% of the bugs and that customers could simply file tax returns using the income tax e-portal. You must first register and log in to the site at https://www.incometax.gov.in/ to do so.

Here is how you can log in to the income tax e-portal using the website:

1. Go to https://www.incometax.gov.in/ to access the income tax e-portal.

2. On the homepage, click the Login Here link.

3. Fill in your Permanent Account Number, or PAN, under the Enter Your User ID option, and then click Continue.

4. Finally, you must confirm the Secure Access Message that you have received. After that, click Continue.

5. Select whether you want to receive the 6-digit OTP through text message or voice call. After you’ve selected an option, press enter. The OTP will only be valid for 15 minutes before you must generate a new one. You’ll get three attempts to type in the correct OTP.

5 Step Guide to ITR Filing

6. Enter the one-time password (OTP) that was sent to your registered mobile number or email address, and then click Login. After successful verification, the income tax e-filing dashboard will appear.

To use the income tax e-filing portal, you can utilise your registered Aadhaar number or net banking. You must input your Aadhaar number and submit the OTP as directed for Aadhaar login. To access your account through net banking, you will need to provide your user ID and password.

You must file your income tax returns for FY21-22 once you have successfully logged in. If you don’t do this, you’ll have to pay a penalty when you file your income tax return later. You’ll also have to pay higher taxes if you file a late return, which means you didn’t file your ITR on time. As a result, it is essential to file your income tax return as soon as possible via the income tax e-filing platform.

New income tax portal errors resulting in reduced tax refund amounts for many


Income Tax Refunds- Affected by Major Portal Issues

Have you gotten a tax refund that is less than what you declared on your income tax return (ITR) for Fiscal Year 2020-21? If you answered yes, you’re not alone; this year, numerous tax return filers had their bank accounts credited with lesser tax refund amounts. This is due to the fact that the new income tax portal did not consider or account for the entire tax credit provided in Form 26AS for these tax return filers.

Form 26AS does not contain/contains partial amount of TDS with respect to the TAN indicated in schedule TDS 1/TDS 2/TCS, according to the explanation stated by the income tax department in the intimation notice.

The TDS amount claimed by these ITR filers, on the other hand, is the same as the amount shown on their individual Form 26AS. The income tax portal allows you to download Form 26AS. Data displayed on one area of the portal appears to be out of sync with/not fully taken into consideration by the processing programme.

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According to Abhishek Soni, CEO of Tax2win.in, an ITR filing service, “We’ve encountered more than ten incidents where the income tax department does not give the entire TDS credit as specified on Form 26AS when processing ITRs. As a result, individual taxpayers receive a less income tax refund than they are entitled to.”

According to tax specialists and chartered accountants, something like this is unusual and does not usually occur during the ITR filing season. Soni explains, “However, there have been instances this year when the pre-filled data obtained on the new income tax site reveals a discrepancy in the TDS amount available against an individual’s PAN, i.e., the full TDS as reflected in Form 26AS is not fetched/pre-filled into the ITR. Despite the fact that the TDS amount is rectified when filing the ITR, it appears that the income tax department processes the ITR using pre-filled data rather than information from Form 26AS.”

Mismatch reason in intimation notice

Form 26AS contains the TDS amount.

According to the taxpayer’s Form 26AS, the total amount of TDS deposited against the individual’s PAN for FY 2020-21 is Rs 4532.31, as shown in the screenshots above. This is the same amount that the individual claimed on his or her ITR form. The income tax department, on the other hand, gives a tax credit of Rs 2,246 when processing the ITR. The amount of TDS credit disallowed by the tax department is Rs 2,286, or over half of the TDS deposited against the individual’s PAN. The point is that the TDS credit has been withheld despite the fact that it appears on the individual’s Form 26AS, which should not typically be the case. This is due to the fact that Form 26AS is meant to represent the TDS information held by the IRS.

Have you submitted your tax return? Here’s how to double-check it.

Here are three examples of full refund amounts that the IRS has disallowed, as well as what taxpayers can do to correct the situation.


CASE I: The income tax department has disallowed a refund of Rs 2,286.

Case #2: The income tax department disallowed a refund of Rs 13,106.

The entire TDS deposited against/credited to the PAN on the taxpayer’s Form 26AS is Rs 20,365, however the TDS credit issued by the income tax department (after processing ITR) in the intimation notice is Rs 7,259. As a result, the income tax department has refused a tax credit of Rs 13,106, resulting in a reduced tax refund.

Case III: Income tax refund of Rs 9,707 denied by the income tax department

The entire amount of TDS deposited against the PAN for FY 2020-21 is Rs 48,331, but the income tax authority has provided a TDS credit of Rs 38,624. As a result, the income tax department denies a tax credit of Rs 9,707 to the taxpayer.

In such a case, what can taxpayers do?

“If the income tax refund you get is less than what you claimed due to a denial of TDS credit as reflected on Form 26AS, you must file a correction request under section 154 to collect the remaining tax refund,” says the IRS.