Tax-saving Techniques: Often, a slight increase in income may lead to falling under the tax bracket. In such scenarios, you have the opportunity to exclude yourself from this scope. In simpler terms, there are five effective tax-saving strategies available that can shield your income from taxation, even if there is a surplus in your account. Let’s explore.
Top 5 Tax-saving Schemes: With the presentation of the budget for the financial year 2023-24, middle-class salaried individuals and others are actively assessing their tax-saving options. These methods are applicable only under the old income tax system, and individuals opting for these benefits must choose the old tax system before the new income tax system becomes effective on April 1, 2023. However, the new tax system exempts individuals from paying tax on earnings up to Rs 7 lakh, a change from the previous Rs 5 lakh limit in the old scheme. However, individuals still have the flexibility to opt for the old tax system.
Top 5 rated tax-saving schemes:
(1). NPS (National Pension System):
Individuals contributing to NPS enjoy an additional tax deduction of Rs 50,000 under section 80CCD (1B). This deduction can be claimed on investments beyond the Rs 1.50 lakh annual limit, allowing tax exemption on NPS investments up to Rs 50,000 in a financial year.
(2). Health Insurance Premium:
Taxpayers can claim exemptions under Section 80D for health insurance premiums paid. The exemption varies from Rs 25,000 to Rs 1 lakh annually. Those below 60 years can claim up to Rs 25,000, and an additional Rs 25,000 for parents if they are below 60. For senior citizens, the limit increases to Rs 50,000, or even up to Rs 1 lakh if the taxpayer is a senior citizen paying premiums for both self and parents.
(3). Home Loan Interest:
Home loan borrowers can claim tax exemption of up to Rs 2 lakh on the interest paid, provided they reside in the unit, or it is self-occupied.
(4). Interest on Savings Account Deposits:
Savings account holders, as per Section 80TTA, can claim TDS exemption on interest up to Rs 10,000 in a financial year. Consequently, for senior citizens, this limit under section 80TTB is Rs 50,000.
(5). Donations to Charitable Institutions:
Lastly, under Section 80CCC, taxpayers making donations to approved charitable institutions can claim tax exemption. The limit for cash donations is capped at Rs 2,000, and payments exceeding this amount should be made through a bank cheque with a stamped receipt from the Trust, mentioning its address, PAN card details, and the Trust’s name.
In conclusion, these top 5 tax-saving techniques provide individuals with strategic avenues to optimize their financial portfolios. From leveraging NPS contributions for additional deductions to claiming exemptions on Health Insurance Premiums and home loan interest, these schemes empower taxpayers to navigate the complexities of the tax landscape. By understanding and wisely utilizing these avenues, individuals can achieve both financial security and tax efficiency in their fiscal planning.
.png)
