Tax Planning- 2022: Smart Hacks to Save Your Tax. Planning your taxes at the start of the year is the key to saving your hard-earned money. It not only buys you time to make profits from your investments but also the tax benefits.
Proper tax planning is not just about saving on taxes. It is also a way to enhance your income. Most people have a tendency to delay tax planning until the eleventh hour. This leads to last-minute investments which are mostly impulsive. Curious to learn how you can be maximize returns from your investments?
Here are some excellent strategies to manage your taxes like a pro:
- Commence tax planning early- The first and most important step to enjoy huge returns from investments is to start planning taxes as soon as a new financial year begins. Chief Investment Officer of Scripbox, Anup Bansal, opines the same: “If one starts at the beginning of the financial year it provides more time to select instruments as per one’s goals and preferences.” This will definitely keep bad investments at bay.
Again, if you invest in PPF, ELSS or similar tax-saving instruments, doing it at the commencement of the year ensures more growth. Also, if there are situations such as revising the rental agreement, you’d have the time to communicate it to your boss.
- Invest money in NPS- Annuity rates in India are quite low. So, most people don’t consider NPS as an attractive investment option. However, Bansal explains that in light of the recent reforms in NPS’s withdrawal rules, the pension scheme opens some smart tax-saving paths for investors. Under Section 80C, you can claim deductions close to Rs. 1.5 lakh per year and around Rs. 50,000 under I-T Act’s Section 80CCD(1b).
- Financial gift to your parents- How can you steer clear of income clubbing? You can give financial gifts to parents and grandparents. Not sure how this works? If parents above the age of 65 don’t have any taxable income, as a taxpayer you can invest for them and get tax-free interest. The exemption amount on taxes senior citizens who are 60+ is Rs. 3 lakh. For those aged individuals who are 80 years old (or more), the amount is Rs. 5 lakh.
- Invest in your kids’ names- Investing on your kids is a brilliant idea to save tax. Once they are 18+, they become eligible for opening a Demat account and investing in mutual funds and the stock market with money received from parents. Long-term tax-free gains can amount to Rs. 1 lakh every year, while Rs. 2.5 lakh exemption could be the short-term gain.
- Pay rent- Under the Income Tax Act’s Section 10(13A), any salaried person residing in a rented apartment can reduce the tax by receiving HRA (House Rent Allowance) from the employer. In case your employer doesn’t give any accommodation allowance, you can claim a deduction of up to Rs. 5000 in taxes as per I-T Act’s Section 80GG.
We may conclude by saying that as a tax paying citizen, your aim is not to averse tax but to optimize returns and savings.
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