Smart Tax Savings Tips for 2022
Taxpayers in India may save tax in various ways under India’s income tax law. You might invest your funds in long-term plans to lower your taxable income. Certain costs, normally important in family life, may also help you save money on taxes.
Taxpayers can select between two tax regimes beginning with the fiscal year 2020–21: the present or old tax system and the new tax concessions. The tax rates due for a specific tax slab vary between these two regimes.
Tax-saving investments will lower your taxable income only under the former tax system. Long-term assets help you avoid taxes. They also help you generate long-term wealth. As a result, most of these assets are good for your current and future wealth. Let us look at how to save taxes for firm owners and salaried workers.
What Exactly Is Tax Saving?
People and firms use tax planning to evaluate their financial situations. They also use it to save on taxes on their yearly revenue and earnings.
According to official statistics for the fiscal year 2014–2015, barely 1.5 percent of Indians pay their taxes.
As a result, proper tax preparation is essential for first-time and seasoned taxpayers. To promote economic growth and personal savings, a proper tax fee is paid to the government.
The Income Tax Act of 1961 gives taxpayers tax-saving options for reducing their tax liability. Various sections provide tax breaks, with Section 80C being the most common. The most commonly used exemption is claiming a housing rent allowance (HRA).
The best way to avoid taxes is to make a real plan and follow it when your wages change. Also, you must make tax-saving investments in the first half of the fiscal year. This will help you avoid making rushed investment choices at the end of the year.
It would also assist if you claimed all the deductions and exemptions to which you are entitled. To do so, you must be aware of and comprehend the numerous exemptions and deductions available.
Top 7 Tax Saving Tips for 2022
- Save funds by paying off your loan’s interest
Tax saving schemes are simple if you’ve got a loan. These could be an education loan, a home loan, a vehicle loan, or a personal loan. People who are paying back debts are eligible for tax breaks from the government.
Life insurance premiums paid for oneself, a spouse, or a child; contributions to the statutory provident fund or superannuation fund, and so on, are examples of Section 80C investments. It may be a superior tax saving option if careful planning via loan repayment is done.
- Investing in tax-free products
The Government of India allows limited tax deductions for certain instruments under Section 80C of the Income Tax Act. You may claim tax deductions for investments in these instruments up to a limit of Rs. 1.5 lakh.
The following are some tax-saving tools:
- Public Provident Fund (PPF)
- Fixed Deposits (FDs) of at least five years
- Employees’ Provident Fund (EPF)
- Senior Citizen Savings Scheme (SCSS)
- Sukanya Samriddhi Yojana (SSY)
- Equity Linked Savings Scheme (ELSS)
- National Pension System (NPS)
When investing in the listed plans, you may avoid taxes and enhance your wealth over time.
- Make a donation
Donating might help you save money on your taxes. Section 80G of the Income Tax Act helps you deduct donations made to charity groups or non-governmental organizations (NGOs) up to a certain limit. This will both save taxes and impart some virtue.
- Select the right tax regime
For Indian nationals, there are now two tax systems accessible. You may choose one of them when submitting your ITR. However, choosing the appropriate tax regime is critical for optimal tax savings.
Lower tax rates are proposed under the new tax framework. It does not, however, provide for tax deductions. As a result, if you want to claim tax deductions under Section 80C of the Income Tax Act, you must use the previous tax system. If not, you may use the new tax structure to decrease your taxable income.
- Get medical insurance for you and your family
Purchasing health insurance packages for yourself and your family can also help you save money on taxes. You may claim a deduction of up to Rs. 25,000 under Section 80D of the Income Tax Act for paying premiums for health insurance for yourself and your spouse.
A senior person may claim a tax deduction of up to Rs. 50,000 as an assessee under the same provision. You can get a tax break of up to Rs. 50,000 if you buy health insurance for your parents over 60.
- Claim tax breaks on your home loan
If you get a house loan from any bank or non-banking financial organization, you may deduct the interest and principal amount from your taxable income. This rule allows a maximum deduction of Rs 2 lakh under Section 24 for house loan interest and Rs 1.5 lakh under Section 80c of the Income Tax Act for home loan principal.
- Keeping medical bills
You may save all of your medical receipts. You can use them to save money on taxes at the end of the year. Medical costs for yourself and your dependent family members are non-taxable, up to Rs. 15,000.
- ITR filing must be completed within the timeframes stated
Everyone must submit an income tax return by the 31st of July of each year or by the date designated by the Income Tax Department. If you miss the deadline or don’t send in the ITR, you will be fined.
Conclusion
It should be noted that many people rush to invest in tax-saving schemes towards the end of the calendar year to save money. This defeats the primary goal of having such deductions. The goal is to enable people to invest in the future.
As a result, the beginning of each fiscal year may be the best time to make tax-saving investments. You can save taxes and make money by investing regularly in various tax-saving schemes. You must educate yourself about all tax-saving investment choices. And invest only in things that are right for you.
To learn more about tax saving schemes, visit Piramal Finance for related blogs and to explore their products and services.