Every year, taxpayers have to file an income tax return (ITR). On your income tax return, which you need to file, you list how much money you made and how much tax you owe. Under different parts of the Income Tax Act of 1961, the Indian government gives some tax breaks and exemptions.
The main reason for the same thing was to get people to invest more money. There are a number of ways to lower your tax bill. Here are some of them:
Some of the 5 ways to save money on taxes are:
Spend money on ways to cut your taxes.
Under Section 80C of the Income Tax Act, the Indian government exempts certain investments from tax. Up to Rs, 1.5 lakh of these investments are exempt from taxation.
Here are some tax-saving investment strategies for 2022:
- Public Provident Fund (PPF)
- Employees’ Provident Fund (EPF)
- Scheme for Investing in Shares (ELSS)
- National System of Pensions (NPS)
- Sukanya Samriddhi Yojana (SSY)
- Fixed Deposits (FDs) of 5 years or more in the Senior Citizen Savings Scheme (SCSS)
By investing in the aforementioned plans, you could not only reduce your tax liability but also increase your long-term wealth.
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Pick the specific tax system.
Right now, people in India can choose between two different tax systems. When you file your ITR, you can choose either one. But picking the right tax system is important if you want to save the most money on taxes.
The tax rate under a new system would be lower, but people wouldn’t be able to get tax breaks. So, you must use the old tax system if you want tax breaks under Section 80C of the Income Tax Act. If not, the new tax system can help you pay less income tax.
You can use an online income tax calculator to help you figure out how the old and new tax systems work if you don’t know how they work.
Get yourself and the people you care about health insurance.
You will also save money on taxes if you and your family have health insurance. A taxpayer can deduct up to Rs 25,000 for their own, their spouse’s, and their dependent children’s health insurance premiums.
Under the same section, if a senior citizen is an assessee, they can get a tax break of up to Rs 50,000. If you paid for health insurance for your parents, you could save an extra Rs 50,000.
You can get tax breaks on your mortgage.
If you get a home loan from a bank or a non-banking financial institution, you can deduct the interest and principal from your taxable income. Under Section 24 of this law, you can deduct up to Rs 2 lakhs of home loan interest. Under section 80C of the income tax, you can deduct up to Rs 1.5 lakhs of home loan principal.
There are due dates for filing ITRs.
Everyone is required to submit their annual income tax return by July 31 or by the date established by the department of income tax. If you miss the deadline or do not file the ITR, you must pay a penalty.
The same thing would enable you to file the ITR before the deadline, which is essential for achieving other objectives, such as obtaining a mortgage loan, filing for immigration documents, conducting high-value trades, etc.
Therefore, here are five tax-saving strategies. People previously invested in tax-saving programs in a hurry at the conclusion of the fiscal year in order to save money on taxes. However, the same factor will make it difficult for people to invest in the future, which is the primary justification for allowing these deductions.
Therefore, the optimal time to invest to save on taxes is at the start of each calendar year or fiscal year. You can reduce your tax liability and increase your wealth if you invest regularly in a variety of ways. You must understand how to invest to reduce your tax liability, and you should only invest in tax-efficient instruments.
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