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Top 6 Ways to Save Income Tax in FY 2022-23

Many wonder how they can maximise their income tax saving for the financial year 2022-23. To save a major chunk of the salary, one must pay close attention to the tax-saving products available in India. For instance, salaried employees can save money on taxes through sections 80CCD, 80CCC, and 80C. Other than these, they have several ways to claim tax exemptions and deductions while filing their tax return, such as through Home Loans, education loans, and instant Personal Loans Online for specific purposes.

The saved tax amount largely depends on the income tax regime they choose this year. Those who opt for the old tax regime will continue claiming tax deductions and exemptions as before. However, those who opt for the new tax regime have separate ways to save income tax. Here are a few tax-saving options to save income tax in FY 2022-23.

1.Deductions under Sections 80C, 80CCC and 80CCD

Indian citizens can save money on taxes through these three sections. Those who invest money in the instruments mentioned in these sections can claim appropriate deductions. One can save taxes up to Rs 1.5 Lakh through the following financial tools:

  • PPF (Public Provident Fund): It is a tax-saving scheme that people can avail of at most Indian post offices and banks for a 15-year term. It is tax-free, with interest rates changing every quarter.
  • Tax Saving FD (Fixed Deposit): It is a 5-year FD scheme that provides a tax deduction of up to Rs 1.5 Lakh. The interest rate is taxable.
  • NSC (National Saving Certificate): This is another 5-year tax-saving scheme that offers an attractive rate of interest. The interest automatically goes towards the limit of Rs 1.5 Lakh under section 80C.
  • NPS (National Pension System): Taxpayers can claim a tax deduction of up to Rs 1.5 Lakh for contributions made to the NPS scheme under Section 80CCD.
  • EPF (Employee’s Provident Fund): Contributing 12% of the salary toward the EPF scheme goes towards the Rs 1.5 Lakh limit under Section 80C.
  • SCSS (Senior Citizen Saving Scheme): This scheme is specifically meant for citizens over 60 years. The SCSS contribution automatically goes towards the Rs 1.5 Lakh limit, and the interest amount is taxable.
  • ELSS (Equity-Linked Saving Scheme) Funds: Investing at least 80% of the asset in mutual funds goes towards equity with a 3-year lock-in period. It is subject to a 10% Long Term Capital Gain Tax and offers more than Rs 1 Lakh as an exemption.
  • LIC Premiums: Insurance policies, including ULIP, endowment policies, term insurances, etc., are tax deductible up to Rs 1.5 Lakh. One condition is that the insurance should cover ten times the premium amount paid annually.
  • Sukanya Samriddhi Yojana: Parents of a female child up to 10 years can claim a tax deduction through this scheme. The scheme is 21 years long or until the daughter gets married after reaching 18 years of age.
  • Home Loan Repayment: Repaying a Home Loan provides a tax deduction of up to Rs 1.5 Lakh per annum on the principal amount.
  • Education Fees: Taxpayers can claim a deduction of up to Rs 1.5 Lakh on their children’s tuition fees.
  • Medical Expenses: Section 80D provides salaried employees with tax deductions against health insurance. They can claim a deduction of up to Rs 25,000 against health insurance for spouses and children and Rs 25,000 more for parents.

2.Loans

Home Loan: Home Loan borrowers can claim a tax deduction of up to Rs 2 Lakh on the payable interest amount under Section 24. An interest rate calculator to helps calculate the interest amount, allowing borrowers to claim appropriate deductions.

Education Loan: Those who borrow an education loan for their or their spouse or children’s higher education can claim tax under Section 80E. The section allows deduction on the interest payment without any maximum limit on deductions.

3.Investments

Those who invest their money in mutual funds and shares can save tax under Section 80CCG. Indian citizens earning below Rs 12 Lakh per annum can claim an additional deduction by investing in some specific mutual funds and company shares. Rajiv Gandhi Equity Savings Scheme provides such deductions to first-time investors only. Moreover, long-term capital gains offer tax benefits when the taxpayers sell the asset and invest in specific financial tools. It is an asset the investor has owned for more than three years.

4.Donations

Contributing to the National Relief Fund or donating money for charity or social purposes can save tax on donations. Taxpayers can claim 50% of the donation amount to NGO, along with the adjusted total income’s 10%. However, to claim a deduction, the taxpayer must provide an 80G certificate from the NGO. Donating to political parties also allows tax deduction under Section 80GGC.

5.HRA and LTA

In India, employees deduct HRA (House Rent Allowance) from their income, which helps them save taxes under section 80GG. If they pay a total rent of more than Rs 1 Lakh per year, they can claim the deduction by providing their lease agreement, House Owner’s PAN Card, etc. Those who get LTA (Leave Travel Allowance) from their employers can get tax-free LTA two times in four years. To claim this deduction, the taxpayer must travel within India with a spouse, parents, or children.

6.Deductions Under the New Tax Regime

Although the common deductions for FY 2022-23 are not available under the new tax regime, it allows deductions under Section 80CCD (2). It depends on the employer’s contribution to their employee’s NPS (National Pension System) account. The maximum tax deduction is 10% of the salary for private employees and 14% for government employees.

These are some of the most popular and effective ways of saving money on taxes in 2022-23. However, some other options to save money on taxes include gratuity, meal coupons, phone and internet-related expenses, employer’s leased car, leave encashment, compensation on voluntary retirement, instant personal loans for business purposes, etc. Planning the income, expenses, taxes, and investments appropriately can help save a considerable amount in legal ways.

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