Tax planning Tips: As the fiscal year 2023–2024 gets underway, it’s critical to understand the different approaches and pointers that can reduce your income tax liability. The tax laws offer provisions and deductions that, when used wisely, can help you reduce your tax liability and increase your take-home pay. This article offers helpful advice that will help you reduce your income tax liability for the current fiscal year. These suggestions, which range from using tax deductions to optimizing your pay structure, are meant to assist you in taking advantage of all the potential tax savings.
How to Save Income Tax in India for FY 2023-24?
You will need to keep a careful eye on the available tax-saving financial products if you want to save a significant portion of your income in India. Sections 80C, 80CCC, and 80CCD provide tax savings opportunities for salaried professionals in India. Indian citizens can claim additional tax deductions when filing their tax returns in a number of different ways. Continue reading to learn about the various ways you can save money and reduce your tax liability.
Read Also: Penalty for not showing the income in Income Tax Return
Top 10 Strategies to Reduce Taxes
The following are 10 tips that should be followed to save money on tax:
1) Section 80C, Section 80CCC, and Section 80CCD deductions
These three sections provide tax savings for Indian citizens. People are eligible for certain deductions if they have invested in the securities listed in Sections 80C, 80CCC, and 80CCD.
Here are some of the financial tools that can help save up to Rs.1.5 lakh:
1. Public Provident Fund (PPF)
This savings plan is available for 15 years at a tax-free interest rate of around 7%, which is subject to quarterly changes, at the majority of Indian banks and post offices.
2. Tax Saving Fixed Deposits (FD)
With this five-year FD scheme, you can deduct up to Rs. 1.5 lakh in taxes. The interest rate is taxable and ranges from 7.00% to 8.00%.
Read Also: Are all FDs tax saving? What is Tax Saving Fixed Deposit?
3. National Saving Certificate (NSC)
This program offers a 6.80% interest rate for a five-year term. The interest rate is automatically deducted from the Rs. 1.5 lakh 80C limit.
4. National Pension System (NPS)
Under Section 80CCD, the taxpayer is eligible for a tax deduction of up to Rs. 1.5 lakh for contributions made to the NPS scheme.
5. Employee’s Provident Fund (EPF)
A 12% salary contribution to the EPF plan is deducted from income and counts toward the Rs. 1.5 lakh Section 80C maximum.
6. Senior Citizen Saving Scheme (SCSS)
The amount contributed to SCSS is also deducted from the maximum of Rs. 1.5 lakh. Citizens over 60 can apply for the SCSS, which has a 5-year tenure and a taxable interest rate of 7.60%.
Read Also: Bank FD vs Senior Citizen Savings Scheme (SCSS): Interest rate, tenure, tax benefits
7. Equity-Linked Saving Scheme (ELSS) Funds
A minimum of 80% of a mutual fund’s assets are allocated to equity, which has a 3-year lock-in period and is 10% subject to long-term capital gain tax. Over Rs. 1 lakh is exempt under this scheme.
8. LIC Premiums
As long as the insurance covers ten times the yearly premium, various insurance policies, such as endowment policies, ULIPs, and term insurances, offer tax deductions of up to Rs. 1.5 lakh.
9. Sukanya Samriddhi Yojana
Parents of girls under the age of ten may take advantage of this scheme’s tax deduction. The Sukanya Samriddhi Yojana offers a 7.60% (taxable) interest rate for a period of 21 years, or until the girls marry after 18 years.
10. Repayment of home loan
Repaying the principal on a home loan also allows for an annual tax deduction of up to Rs. 1.5 lakh.
11. Tuition fees:
The taxpayer may deduct up to Rs. 1.5 lakh in taxes when paying for their children’s tuition.
Read Also: Income tax return: 10 mistakes to avoid while filing ITR for AY 2023-24
2) Medical Expenses under section 80D
A salaried employee may claim a tax deduction against health insurance under Section 80D. For spouses and dependent children, an individual may claim up to Rs. 25,000 against medical insurance, and for parents, an additional Rs. 25,000. A person can make a claim against medical insurance up to Rs. 50,000 that they have taken out to cover their elderly parents.
3) Home Loan deduction under section 24
Section 24b of income tax act allows deduction of interest on home loan from the taxable income. Such loan should be taken for purchase or construction or repair or reconstruction of house property. These limits of deduction are applicable assessee wise and not property wise. Therefore if a person owns two or more house property then the total deduction for that person remains the same.
1) In Let Out Property/Deemed to be Let Out – Rs. 2 lakh
2) Self Occupied House (SOP) – Rs. 2 Lakh
In the following cases, the above limit of Rs 2,00,000 for SOP shall be reduced to Rs. 30,000
– Loan borrowed before 01-04-1999 for any purpose related to house property.
– Loan borrowed after 01-04-1999 for any purpose other than construction or acquisition.
– If construction/acquisition is not completed within 5 years from the end of the financial year in which capital was borrowed. For example, a loan is obtained for construction/acquisition on 28 Oct 2019 then the deduction limit should be reduced to Rs 30,000 if the construction/acquisition completes after 31 March 2025.
Read also: Old vs new tax regime – How much tax you need to pay on your income
4) Education Loan under section 80E
By choosing to take out an education loan for themselves, their spouses, their children, or another higher education, people can save taxes. People can deduct their loan interest payments from their income by using Section 80E of the Income Tax Act. The total amount of deductions they are eligible to make is not capped.
5) Shares and Mutual Funds under section 80CCG
Investing in shares and mutual funds can result in tax savings for individuals. Citizens who invest in certain companies’ shares and certain mutual funds are eligible for an additional deduction under Section 80CCG of the Income Tax Act, provided their yearly income is less than Rs. 12 lakh. The Rajiv Gandhi Equity Savings Scheme offers the deductions, which are restricted to first-time investors.
6) Donations under Section 80G/GGB/GGC
Indian citizens can receive tax benefits by deducting the amount they spend on donations, whether they are made for charitable or social causes or to the National Relief Fund. 10% of the adjusted gross income and 50% of the money donated to the NGOs are each eligible to be claimed by an individual. For the taxpayer to be eligible for a tax deduction under Section 80G of the Income Tax Act, the NGOs must furnish an 80G certificate. If a person donates to any political party and satisfies certain requirements, they may also be eligible for a tax deduction under Section 80GGC.
Read Also: Tax on cash deposit and withdrawal; Everything you need to know
7) Rent paid deduction under section 80GG
Employees in India are entitled to a House Rent Allowance (HRA). When employees or any person does not receive HRA, they still can claim deduction under section 80GG, it helps taxpayers save money on taxes.
80gg deduction limit and tax deductions under this section are based on Tax Rule 2A. As per Section 10(13A), the least amount from the following calculations is considered a non-taxable income.
- Rs.5000 per month or Rs.60000 a year.
- The yearly rent amount minus 10% of the taxpayer’s adjusted total income.
- 25% of the adjusted total income for a year.
8) Leave Travel Allowance (LTA)
Taxpayers are entitled to tax-free LTA if they receive it from their employers. A person has up to two claims during a four-year period. They must go anywhere in India during their leave to claim it, and they are allowed to bring their spouse, kids, and parents.
These are a few of the widely used strategies that allow taxpayers to save money. Taxpayers may save a significant amount of money if they properly manage their income, investments, expenses, and taxes. It’s advised against using shady methods to reduce taxes.
Read also: Life insurance policy proceeds over Rs 5 lakh to be taxable: New rule
9) Deduction for Person suffering from Physical Disability- Section 80U
A deduction of Rs. 75,000 is available to a resident individual who suffers from a physical disability (including blindness) or mental retardation. In case of severe disability, deduction of Rs. 1,25,000 can be claimed.
10) Section 80 TTA/TTB (Savings account)
The Saving account interest of an individual, other than senior citizen, included in the “income from other sources” and maximum available deduction on such interest is Rs.10,000. Under section 80TTB, a senior citizen can avail tax deduction upto Rs 50,000 from interest of saving account, Fixed deposit, post office savings etc.
Some Other Choices to Help You Reduce Your Tax Bills
The list of additional options that a taxpayer may use in order to claim tax deductions is as follows:
- Gratuity: After five years of employment, an employee is eligible for a gratuity, which is their employer’s retirement benefit. The gratuity is paid and not subject to taxes at the time of retirement or resignation from employment.
- Meal coupons: Employees receive meal coupons, such as Sodexo or Zeta, from their employers. These coupons are tax-exempt up to a monthly maximum of Rs. 2,600.
- Expenses related to the internet or phone: Some employers pay back employees’ internet or phone-related costs, which saves them money on taxes.
- Employer-provided car lease policy: Taking advantage of this benefit can help an individual save money on taxes.
- Leave encashment: Certain employers permit their workers to use some of their unused leaves for this purpose. The process of encashing leaves enables employees to make tax deduction claims.
- Exemption under Section 89(1): Salary received in advance or arrears is exempted from tax under Section 89(1).
- Exemption on receiving compensation on opting for voluntary retirement:If the employee meets the requirements outlined in rule 2BA, any compensation they receive upon choosing voluntary retirement is exempt from tax under Section 10(10C). In order to qualify for tax deduction under this section, the amount of compensation must not exceed Rs. 5 lakh.
Read Also: Cash Transactions Limits and penalties; everything you should know
Conclusion
It takes proactive planning, knowledge of available deductions, and appropriate use of tax-saving options to save income tax on your salary. You can maximize your tax savings and optimize your finances by implementing in the suggestions listed above as well as investigating other tactics like employing LTA, investing in tax-saving mutual funds, and evaluating the impact of additional deductions.
Disclaimer: The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon.
Also, www.babatax.com and its members do not accept any liability, obligation or responsibility for author’s article and understanding of user.
For Collaborating with us-
- Mail us at [email protected]
- Whatsapp us at +91-702498492
