How to Save Income Tax in FY 2021-22?

Tips on how to Save Revenue Tax in FY 2021-22?

Each Indian & Non-Indian Resident who makes greater than Rs 2.5 Lakh yearly is remitted to file an Revenue Tax Return in our nation. Nevertheless, the IT Act, 1961, presents a number of tax saving choices to every of assesses. By making use of those saving and funding choices, you may retain extra in your pocket and make many of the out there tax-saving provisions.

Now let’s discover choices of saving earnings tax for FY 2021-22.

1. Know your tax regime

Union Price range 2020 launched a brand new tax-saving regime with slight variations within the tax slabs. Let’s assessment the brand new and outdated tax slabs under.

Previous & New Revenue tax slabs relevant for FY 2021-2022

The brand new tax slab is straight ahead and removes relevant deductions as below the outdated regime. The brand new IT regime doesn’t incentivise the assesses for saving, funding and insurance coverage schemes. Because of this the tax saving can be extra for a savvy investor within the older regime. The brand new regime is greatest for a middle-income group who don’t save or make investments with their earnings.

Thus we’ll share all out there tax saving choices for the outdated regime on this article.

2. Totally utilise Rs 1.5 lakh restrict below Part 80C

Beneath Part 80C of the Revenue Tax Act, every particular person can declare a rebate on taxable earnings for a most of as much as Rs 1.5 lakh. This deduction is on the market for the next saving, funding and insurance coverage schemes.

a) Tax-Saving Mounted Deposits (FDs): The quantity invested in 5 years or above tax-saving Mounted Deposits might be claimed below part 80C and scale back your web taxable earnings. These FDs fetch most and guaranteed deposit returns and thus common amongst risk-averse buyers like senior residents.

b) Public Provident Fund (PPF): PPF is a government-backed long run funding choice for retirement. The scheme falls below Exempt-Exempt-Exempt (EEE) class, carries excessive returns and 100% safe. The principal, in addition to curiosity, is exempt from taxation. The person can declare a max as much as Rs 1.5 Lakh tax rebate u/s 80 C for investing in PPF.

c) Fairness Linked Financial savings Schemes (ELSS): Because the identify suggests, ELSS funds make investments a minimal of 80% in fairness, and they’re tax saving mutual fund schemes with a 3 12 months lock-in interval. The long run capital positive factors over and above Rs 1 lakh are charged at 10%.

d) Nationwide Saving Certificates (NSC): Nationwide Financial savings Certificates is one other government-backed tax saving funding scheme with a hard and fast tenure of 5 years. The speed of return is presently 6.8%, and funding might be claimed for deduction u/s 80C.

e) Premium paid for Life Insurance coverage: Premium paid for all times insurance coverage schemes akin to ULIPs, time period insurance coverage and endowment insurance policies are additionally capped below 80C. The general insurance coverage cowl ought to be a minimum of 10 occasions the annual premium.

f) Residence Mortgage Compensation: The principal compensation quantity of a Residence Mortgage in a Monetary 12 months is tax-deductible as much as Rs 1.5 lakh every year u/s 80 C.

g) Tuition charges: The cost of tuition charges for youths is tax-deductible for fogeys below part 80C.

h) EPF: Once more, contribution to EPF is roofed below Part 80C.

i) Senior Residents Financial savings Scheme (SCSS): Investments in SCSS can also be tax deductible as much as Rs 1.5 lakh u/s 80C. These schemes yield higher than financial institution FDs and are strictly supplied to senior residents.

j) Sukanya Samriddhi Yojana (SSY): Funding in SSY for a woman baby will also be claimed for tax profit below part 80C.

okay) These are numerous schemes that defend your future and yield good returns, and provide tax profit below part 80C. Nevertheless, the declare might be made for a max as much as Rs 1.5 Lakh.

3. Nationwide Pension System (NPS):

The extra deduction of Rs 50000 might be claimed below Part 80CCD (1B) for funding to the NPS. Nevertheless, the quantity might be claimed on the age of 60.

4. Well being Insurance coverage Premiums U/S 80D

Beneath Part 80D, one will get a deduction of as much as Rs 25,000 for cost of medical health insurance premium. For senior residents, the max restrict is Rs 50,000 and for self and senior citizen mother and father capping is as much as Rs 75,000 every year.

5. Home Lease Allowance (HRA)

Moreover, there’s a provision of claiming a tax deduction on cost of housing lease. You’ll be able to declare a deduction of as much as Rs 60,000 every year below Part 80GG.

6. Compensation of curiosity on a house mortgage

Beneath Part 24 of the Revenue Tax Act, a borrower is eligible to say deduction as much as Rs 2 lakh every year on Residence Mortgage Curiosity compensation. Over and above this restrict, a further deduction of Rs 1.5 lakhs is obtainable for curiosity funds on loans taken as much as March 31, 2022, for the acquisition of an inexpensive residence as much as Rs 45 lakhs.

7. Charity in favour of registered NGOs

Part 80G of the Revenue Tax Act permits you to declare tax advantages on 50% of the donated quantity to NGOs. The max tax saving shouldn’t be over 10% of your taxable earnings.

8. Compensation of Training Mortgage

The compensation of an training mortgage makes one eligible to say a tax rebate on curiosity element EMI funds for 8 years below part 80E. No tax profit is obtainable for the principal a part of the mortgage instalment.

9. Conveyance Allowance

Each new & outdated regimes provide earnings tax exemption for conveyance, journey and different allowances given by the employer.

10. Curiosity earned in Financial savings Accounts

Curiosity earnings as much as Rs 1000 on financial savings accounts per monetary 12 months is exempted for tax below Part 80TTA. Beneath part 80TTB, the restrict is Rs 50,000 for senior residents, which incorporates curiosity earned on each FDs and financial savings accounts.

Utilizing these provisions, it can save you substantial earnings tax legally. These tax-saving avenues not solely depart a lot money in your pocket or important financial savings & funding devices but in addition align your portfolio for higher monetary well being. As a rule of thumb, deduction u/s 80 C & 80D ought to be claimed by all. Additional advantages ought to be used as per your private life stage. Hope you make most of all these tax saving choices.

Additionally Learn: Revenue Tax Return Submitting: How Sure Mortgage Merchandise Can Assist You Save Revenue Tax

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