If planning is done properly then a lot of income tax can be saved. If you want to save tax in the next financial year, then it would be better to make a plan now.
One can easily save tax by investing in certain instruments from April 2022 to March 2023.
There are only a few days left before the start of April. In such a situation, this is the best time for tax saving planning.
We are telling you about the easiest ways to save tax.
Section 80C is helpful in saving as well as saving tax
The easiest way to save tax is by investing in instruments covered under section 80C of Income Tax, 1961. Certain expenses are also allowed to claim tax deduction under this section. Children’s tuition fees are an example of this.
So if your children go to school or college then you can avail tax exemption on tuition fees. This discount is for two children only.
What comes under the purview of section 80C?
Section 80C covers PPF, equity mutual funds, 5-year tax-saving fixed deposits, life insurance and pension plans. It is easiest to make full use of section 80C to save tax. Deduction is allowed under this section up to Rs 1.50 lakh per annum.
This means that if your total salary is Rs 10 lakh per annum, then Rs 1.5 lakh will be deducted from it for tax calculation.
The best part is that section 80C also helps you in making good savings. You can avail tax exemption by investing in tax schemes of mutual funds. The SIP route will be the best for you.
In this, every month a fixed amount will go from your savings account to SIP. It is very helpful in garnering good wealth in the long run. The tax saving scheme of mutual funds is called ELSS. Generally, the average return of schemes in this category is more than 10 per cent per annum.
Tax deduction is also available on life insurance premium under 80C. If you have taken a life insurance policy, then you can avail tax exemption on its premium.
If you have not taken a life insurance policy yet, then you should get a policy with adequate life cover soon. The younger the life insurance policy is taken, the lower its premium.
Allowance component in salary helps in saving tax
Many companies provide transport allowance, telephone allowance, food coupons etc. to their employees for tax saving. Actually, it is part of your salary package.
However, these allowances do not come under the purview of tax. This reduces your total taxable salary. That’s why you must check your salary structure once. If such allowance is not included in it, then you can talk to HR about it.
Tax deduction allowed on HRA
Companies also give House Rent Allowance (HRA) to their employees. You have to check once whether it is included in your salary or not.
If this component is not included you can talk to your HR about including it. Tax deduction can be claimed on HRA. This reduces your total taxable amount.
Nowadays many people like to do charity. They contribute a part of their income to charity. If you are interested in charity, don’t forget to claim tax exemption on it. Under Section 80G of Income Tax, you can claim deduction on charity up to 10% of your income.