There are still a few days until the end of the 2021-22 fiscal year (FY 2021-22). If you have not yet planned for tax savings, this article is for you. Here are some tips to reduce tax burden and save tax.
A salary of one lakh though, can save tax, which requires thorough planning. Even if the company you work for deducts tax money from your salary, you can recover the withheld tax by filing income tax returns with details of the investment.
If the annual income is more than Rs.10 lakh, the tax rate is 30 per cent
1. First deduct the amount of standard deduction of Rs.50,000 provided by the government. Now your taxable income is Rs.11.50 lakh.
2. Now you have Upto Rs.1.5 lakh can be taxed. In this, you can claim tuition fees for children, PPF, LIC, EPF, Mutual Fund (ELSS), principal amount paid for home loan etc. In this category, your taxable income here is Rs.10 lakhs.
3. 50 Thousand should be invested under National Pension System (NPS) under 80CCD (1B) to bring the tax amount to zero (0) on a salary of 12 lakhs. This will reduce your taxable salary to Rs.9.5 lakh.
4. Now you have to pay Rs.1.5 lakh and up to Rs.1.5 lakh under Section 80EEA of the Income Tax Act. This way, you can deduct a total of Rs.3.5 lakh from the interest on the home loan. An additional 1.5 lakh exemption was given in the 2019 budget for affordable housing.
To be tax deductible for interest under Section 80EEA, your home loan must have bank or NBFC approval between April 1, 2019 and March 31, 2022. Also, the stamp duty on the property should not exceed Rs.45 lakh. The home buyer should not have any other residential property. This will reduce your taxable income to Rs.6 lakh after claiming Rs.3.5 lakh.
5. Under Section 80D of Income Tax, you can get Rs.25,000 medical insurance for your family (spouse and children). In addition, senior citizens can claim up to Rs 50,000 for health insurance premiums paid to parents. Apart from this, a health check-up of up to Rs.5,000 is also allowed. After claiming a total of Rs.75,000 health insurance premium, your taxable income will be reduced to Rs.5.25 lakh.
6. Now if you donate 25 thousand rupees to any organization or trust, your taxable income will be 5 lakhs. You can claim it under section 80G of the Income Tax Act. When you donate Rs.25,000, your taxable income is reduced to Rs.5 lakh.
Now your taxable income is Rs.5 lakhs. On income of 2.5 to 5 lakh rupees, at the rate of 5 per cent, your tax is Rs.12,500. But this has been exempted from the government. This way the tax you have to pay will be zero.