Individual taxpayers can reduce their tax burden in a variety of ways under India’s income tax system. For example, you might invest your funds in certain long-term plans to lower your taxable income. In addition, certain costs, which are typically important for family life, such as the mediclaim policy, also enable you to save taxes.
Every taxpayer must submit their income tax return (ITR). Your annual income is detailed in your income tax filings and 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. Tax specialists have identified five efficient tax-saving strategies for the fiscal year 2023.
Listed below are some of the major features of Union Budget 2023 that can be tapped to reduce your tax obligations.
Utilise investment to reduce taxes: Under section 80C of the income tax act, the Indian government has allowed some tax deductions on investments 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 when you file an income tax return.
Following are a few strategies for investing in 2023 that will save taxes
- Public Provident Fund (PPF): The majority of Indian banks and post offices provide this 15-year savings plan with a 7.1% interest rate that is tax-free, and the interest rate fluctuates every three months.
- Employee’s Provident Fund (EPF): The Section 80C limit of Rs. 1.5 the 12% of pay increases lakh contributed to the EPF plan.
- Equity Linked Savings Scheme (ELSS): Mutual fund investments must account for at least 80% of the asset’s equity and come with a three-year lock-in period and a 10% long-term capital gains tax. This program provides an exemption of more than Rs. 1 lakh.
- National Pensions Scheme (NPS): A tax deduction of up to Rs. 1.5 lakh is available to the taxpayer for contributions to the NPS plan.
- Sukanya Samriddhi Yojana (SSY): The parents of a girl under 10 years old may benefit from a tax break under this program. The program’s 21-year term, which ends when the girls marry after 18 years, gives a 7.6% interest rate (taxable).
- Senior Citizen Saving Scheme (SCSS): The ceiling of Rs. 1.5 lakh also includes contributions paid to SCSS. Citizens over 60 can apply for the SCSS, which has a 5-year term and an interest rate of 7.60% that is taxed.
- FDs with a maturity of five years or longer: This five-year FD plan allows you a maximum tax deduction. The interest rate, which is taxed, is between 7.00% and 8.00%.
Choose a specific tax system: Right now, there are two different taxation systems available to Indian residents. You may select any one of the two options when submitting the income tax return. However, to ensure the greatest tax savings, appropriate tax regimes would be essential. Although the new tax system offers a reduced tax rate, tax deductions are not permitted. As a result, you should use the older tax system when requesting tax deductions under Section 80C of the Income Tax Act; otherwise, you may choose to use a new tax system to reduce your income tax. An online income tax calculator is available to assist you in determining the differences between the old and new tax regimes.
Secure Your Health with a Comprehensive Mediclaim Policy
Buying mediclaim policy for yourself and your family will allow you to major tax benefits. Following Section 80D of the Income Tax Act, an Assessee may deduct up to Rs 25,000 from their taxable income for the cost of their premiums and the premiums for their spouses and children. A senior citizen who filed taxes could do so under that clause up to a maximum of Rs 50,000. Therefore, an additional Rs 50,000 might be saved when you buy a mediclaim policy for your parents.
Tax benefits on home loans:There are several tax benefits on home loans, which you should consider. Some of them are
- Home loan interest deductions of up to Rs 2 lakh per year are allowed under Section 24 of the Income Tax Act.
- Home loan principal amount deductions of up to Rs 1.5 lakh per year are allowed under Section 80C of the Income Tax Act.
- These deductions help reduce the taxable income and ultimately lower the tax liability.
- Tax benefits on home loans provide an incentive for individuals to invest in property and make homeownership more affordable.
- These deductions are applicable to both self-occupied and rental properties.
File income tax returns by the deadlines
Every year, before July 31 or any other date specified by the income tax department, an individual or business must submit their ITR. Although, when you are unable to submit your income tax details, a fee will be charged by the specified deadline, for other reasons as well, such as getting a home loan, applying for immigration documents, carrying out a transaction of greater value, etc., filing the income tax return before the deadline is essential.
At the end of the fiscal year, a variety of people suddenly invest in tax-saving policies to save on taxes. The beginning of the fiscal year would be the ideal moment to invest in tax-saving plans. You can consistently invest in securing taxes and increasing wealth using various tax-saving methods. As a result, we can conclude that you should research the best tax-saving investment plans and limit your investment activities to the categories of instruments that are most applicable to you. Make sure while filing the income tax return you do not make any mistakes in filling up the details so that you can get the comprehensive tax benefit that you are entitled to.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.