Tax planning is a crucial aspect of personal finance that can help you reduce your tax liability and maximize your savings.
A recent survey said 70 percent of taxpayers in India file their income tax returns (ITR) but do not plan, resulting in a loss of up to Rs 40,000 in taxes alone.
As the financial year 2022-23 is coming to an end, it is time to focus on tax planning and take advantage of all the available deductions, exemptions, and credits to save on taxes.
Here are six tips that can help reduce your tax burden:
Submit investment proof
Ensure you submit your investment proof to the employer before the deadline so that the employer deducts the correct amount of TDS.
Keep documents ready
Ensure you have maintained a record of documents for investments made by you like PF account statements, passbooks, copies of insurance policies, pension plans, bank statements, etc., ready while filing ITR to avoid any kind of hassle.
Investment in tax-saving options
Certain exemptions and deductions prescribed by the Income Tax Department help reduce your taxable income and save taxes. If you haven’t yet invested in such options, consider doing so before the deadline.
Section 80C is a common deduction that most taxpayers can benefit from. It serves the dual purposes of meeting financial goals and saving taxes (taxable income can be reduced up to Rs. 1.5 lakh). Some popular investment options are EPF, PPF, FD, ELSS, etc. Other than Section 80C, there are more tax-saving options, like Section 80CCD (1B), Section 80D, Section 24B, etc, investing under these sections can also help you maximize your tax savings.
Make charity donations
Charity donations help you in both ways- a noble work and a way to reduce your income tax. An individual, company, or HUF can claim 100 per cent or 50 per cent deductions on charity activity, depending on the donations specified under Section 80G of the Income Tax Act. Consider donating to a registered charity before March 31 to claim this deduction. However, ensure you obtain a receipt as it will be required while filing your tax returns.
Submit rent receipts
If you are paying rent for a house or apartment and receiving HRA from your employer, you can claim an exemption for the rent paid towards your accommodation. This HRA exemption is computed on the basis of some conditions as specified in income tax rules. To claim this exemption, you must submit rent receipts to your employer before the deadline. Also, if there is no HRA component in the salary, a person can claim a deduction u/s 80GG for the rent he paid during the year.
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Claim deductions for medical expenses
If you have incurred any medical expenses for the health of senior citizens (aged 60 years or above) during the financial year, you can claim a deduction for the same under Section 80D of the Income Tax Act. This deduction can be claimed for medical insurance premiums paid for yourself and your family. Also, a person can claim preventive health checkups up to Rs. 5000, which can be spent in cash.