As the financial year draws to a close, you’ll soon be required to provide your investment and expenditure receipts for tax deduction from your salary. Subsequently, you have the obligation to file an Income Tax Return (ITR) by July 31, the final opportunity to settle your annual income-related tax liabilities. It’s crucial to note that the Indian government offers tax deductions and exemptions under various sections of the Income Tax Act, 1961. To avail them here are five tax-saving strategies for you for FY24.
1. Choose the Right Tax Regime
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At present, there are two tax regimes for Indian citizens. The choice between the old and new tax regimes depends on the taxpayer's preference for tax deductions. The new tax regime offers a lower tax rate but eliminates tax deductions. Under the new tax regime there is no tax on income up to Rs 7 lakh. Moreover, you can claim a tax deduction of Rs 50,000. Taxpayers seeking deductions under section 80C should opt for the older tax regime, while others can choose the new regime. For example, for income Rs 15.5 lakh and above upto Rs 5 crore tax liability will remain the same under both the regimes with deduction limit of Rs 3.75 lakh (excluding standard deduction). If you have taken a home loan or can avail House Rent Allowance (HRA) then old tax regime might be better for you. Hence, carefully choose between the two using online income tax calculators available on the income tax website to assess the variance.
2. Invest in Tax-Saving Instruments
For those opting for the old regime, the government allows tax deductions on certain instruments under section 80C of the Income Tax Act. Taxpayers can claim deductions, with a maximum limit of Rs 1.5 lakh, for investments made in instruments such as:
Public Provident Fund (PPF)
Employees’ Provident Fund (EPF)
Equity Linked Savings Scheme (ELSS)
National Pension System (NPS)
Sukanya Samriddhi Yojana (SSY)
Senior Citizen Savings Scheme (SCSS)
Fixed Deposits (FDs) of 5 years or more
According to tax experts, investing in these schemes not only saves taxes but also contributes to long-term financial growth.
3. Purchase Health Insurance
Tax savings can be achieved by buying health insurance policies for oneself and family members. Under section 80D of the Income Tax Act, taxpayers can claim a deduction of up to Rs 25,000 for health insurance premiums, and senior citizens can claim up to Rs 50,000. Additional savings can be realized when purchasing health insurance for parents. However, this deduction is also available only under the old tax regime.
4. Leverage Tax Benefits on Home Loans
Individuals with home loans from banks or non-banking financial institutions are eligible for deductions on loan interest and principal amounts. Section 24 allows for a maximum deduction of Rs 2 lakh on home loan interest, and section 80C permits Rs 1.5 lakh for the home loan principal.
5. File Income Tax Returns on Time
Filing income tax returns before the stipulated deadline, typically by July 31st, is crucial to avoid penalties. Failure to meet the deadline may result in penalties and can impact various processes, including applying for a home loan, immigration documents, or high-value transactions.
While many individuals tend to invest in tax-saving policies towards the end of the financial year, experts recommend starting investments early to fully leverage the benefits. This ensures that the primary purpose of encouraging investments for future returns is not lost. By exploring various tax-saving avenues, individuals can systematically secure tax benefits and build wealth. In conclusion, it is essential to be well-informed about the best tax-saving investment schemes and invest in instruments relevant to individual financial goals.
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