As we already know by now, tax saving is a rather important aspect of financial planning and an intelligent tax planning strategy can serve the dual objective of helping individuals meet their financial goals, while also saving on tax in the meanwhile.
In other words, each and every one of us I think is looking for options to save some extra money, and saving on taxes is one way to do it. Tax liabilities are mostly seen as a heavy burden on all the taxpayers, be it salaried or even a non-salaried class of people.
However, it is worth noting that, in order to save on taxes, you surely need to start your tax planning well in advance. Other than tax planning, you also need to pay due attention to how to receive your tax returns. For some of you wondering as to why is this important? This is because it might reduce your tax liability this year but the overall interest earned on your savings will surely be converted into a tax liability at the end of the next financial year.
As mentioned, if planned properly, salaried people can actually save a lot of money through various avenues available for tax savings under the income tax rules. Apart from this, most the taxpayers are aware of several popular options like public provident funds (PPF), tax-saving fixed deposits, HRA, provident funds as well as a deduction against home loan interest of course.
Basically, most of us have this tendency of being relaxed at the beginning of a financial year with absolutely no hurry to plan our finances as well as taxes. This is the kind of mentality that continues nearly till the end of the financial year and that is actually when the panic and rush begin.
Having said that, let’s have a quick look at some of the tips which would help you to save on taxes!
Top 10 tips to save tax in 2022
1. Proper selection of appropriate components in the salary structure being offered by the employer:
In the case of an individual who is salaried, one can evaluate the salary structure offered by the said employer and actually opt for those salary components which help maximize tax benefits. For instance, one can always opt for a house rent allowance in case they are paying rent, education allowance, food coupons, interest and internet expense reimbursements, and more. On a similar note, a person can always claim appropriate deductions for exemptions or even deductions while computing taxable income.
2. Increase in retirement fund contribution:
As mentioned previously as well, salaried employees can always look at making some additional contributions with respect to voluntary provident fund in addition to EPF, if the investment limit of Rs. 1.5 lakhs are not exhausted of course. This additional investment of yours will also be deducted from taxable income under certain conditions. Moreover, the employer’s contribution to NPS will also help in providing an additional deduction to the employees.
Though it is probably worth noting that, employers’ contribution to EPF as well as VPF should not exceed Rs. 2.5 lakhs in a financial year or otherwise income tax will be payable on the interest accretion on the excess provident fund contributions.
3. Filing your tax return on time:
I believe we already know how important it is to file income tax returns as well as other statutory forms within the specified timelines. If nothing else, it surely does help in setting up a rather proper tax record for any verification or even an inquiry by the tax authority. Furthermore, filed income tax returns are also needed to be submitted for several purposes like applying for housing loans, immigration documents, certain high-value transactions as well as carry forward of losses. As a result, it is very important to file one’s ITR within these timelines to avoid penal or interest implications.
4. Investment in tax-saving instruments:
To actually encourage senior citizens to save, the government has tried to provide certain tax deductions on the amounts invested in specific instruments under section 80C of the income tax act, of 1961. Now, since you may be curious to know what they are, some of the popular specific investment instruments for the purpose of tax planning are public provident funds, ELSS mutual funds, employees provident funds, fixed deposits as well as in the national pension scheme of course.
Now, investing in these instruments will surely play a dual role of one, meeting your financial goals and the other saving taxes. However, the limit for this is just up to 1.5 lakhs and it is only available for only if an individual opts for the old tax regime and not the new one.
5. Save with health insurance:
As discussed before, under section 80D, taxpayers are allowed to claim a deduction of up to Rs. 25000 against payments with respect to the health insurance premiums for family and self. Additional deduction under this section is allowed. If in case you are paying the medical insurance premium for parents then you obviously say claim an additional tax deduction under section 80D.
In addition to this, if parents are below 60 years of age then up to Rs. 25000 deductions can be claimed and if above 60 years of age, Rs. 50000 deductions can be claimed.
6. Claiming an appropriate deduction for medical expenses, tuition fees, and more:
You need to know that, in certain instances, even if one does not make any additional investments in life, they can still avail of certain tax benefits. However, the deduction for expenditure on health checks- is subject to the overall limit under section 80D which includes the health insurance premiums mentioned above. Also, similar to other deductions under 80C, parents can surely claim a tax deduction of up to Rs. 1.5 lakhs for the tuition fees paid for their children’s education.
7. Re-route investment through senior citizen parents:
According to income tax rules, senior citizens are provided with a lot of tax benefits. According to several experts on the field, you can gift money to your parents tax-free Not just that, with that in mind, your parents can then reinvest this money in various attractive senior citizen schemes like Senior Citizen Fixed Deposit, Senior Citizen Savings Scheme, and more.
Having said that, you can use this option to re-route your earnings from investments. However, your parents should have a low income. Otherwise, they will end up paying taxes.
8. New concessional tax regime:
A new simplified and simpler version of the optional personal income tax regime has been introduced by the government last year. Subject to certain conditions, an individual or HUF will have the option to pay taxes at reduced slab rates which are applicable without certain exemptions and deductions. On a similar note, one can compare tax payable under the existing and new tax regimes and opt for the regime which is more beneficial from a tax perspective.
9. Tax benefits on a home loan:
It is worth noting that, if a house loan is being availed from a financial institution such as a bank or NBFC or even housing finance companies in order o construct or acquire a house property, then the principal and interest paid on the loan taken can be claimed as a deduction from taxable income, subject to specified limits under the tax provisions. Moreover, the tax savings can be claimed only if the old tax regime is opted for. Do keep in mind that the deduction on the principal repayment amount is subject to the overall Rs 1.5 lakh limit under Section 80C.
10. Invest in National Savings Certificate:
As some of you might already know, the National Savings Certificate is a fixed-income investment scheme that has been initiated by the government of India. This is a savings bond that encourages small to mid-income investors to invest while saving on income tax, with a maturity period of five years. Again, the limit for the same is Rs. 1.5 lakhs under section 80C of the income tax act.
Reading so far, I hope you have gotten a fair insight into some of the popular financial tips to save taxes and now I believe you would be able to decide on your own whether or not you should follow such tips and tricks to maintain your financial stability.
In conclusion, what are your thoughts on the Top 10 tips to save tax in 2022? Do let us know in the comments area below. To know more about such reports, do check out other articles we have on our website. Thank you for your time & if you found our content informative, do share it with your investor friends!