5 Tax-saving Personal Finance Ideas for 2022
As a taxpayer, you need to file your Income Tax Return (ITR) every year. An ITR contains the details of your annual income and the income tax you have to pay to the Government. The Government of India allows certain tax rebates and exemptions under various sections of the Income Tax Act 1961.
The objective behind this is to encourage people to invest more. There are many other ways as well through which you can significantly reduce your tax outgo.
Some Practical Tax-saving Personal Finance Ideas for 2022:
1. Invest in tax-saving instruments
As mentioned above, the Government of India allows certain tax deductions on the amounts invested in certain instruments under Section 80C of the Income Tax Act. It says that investments made in these instruments are available for tax deductions up to a maximum of Rs. 1.5 lakh.
Some of the best tax-saving avenues for investment in 2022 include:
- 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
By investing in these tax-saving instruments, you can not only save taxes but also create wealth for your long-term financial goals.
2. Opt for the appropriate tax regime
Currently, there are two tax regimes available to Indian citizens. You have the option to opt for either of them while filing your ITR. However, choosing the appropriate tax regime is crucial to ensure maximum tax savings.
While the new tax regime offers lower tax rates, it does not allow tax deductions. So, if you want to avail of tax deductions under section 80C of the Income Tax Act, you need to opt for the old regime. Otherwise, you can opt for the new tax regime to lower your income tax outgo.
You can take the help of an online income tax calculator to know whether it would be beneficial for you to opt for the old tax regime or the new one.
Additional Read: 7 best tax saving options available for you
3. Buy health insurance for yourself and your loved ones
You can even save tax by buying health insurance policies for yourself and your family. As per Section 80D of the Income Tax Act, a deduction of up to Rs. 25,000 is available for the taxpayers for paying health insurance premiums for themselves, their spouses and dependent children.
Additionally, if a taxpayer is a senior citizen, they can avail a tax deduction of up to Rs. 50,000 under this section. Also, you can save additionally up to Rs. 50,000 if you pay for your parents’ health insurance.
4. Don't forget to avail of tax benefits on home loan
Suppose you avail of a home loan from any recognized bank or non-banking financial institution. In that case, you can claim deductions from your taxable income against your loan's interest and a principal component. Under this rule, the maximum deduction allowed is Rs. 2 lakhs under section 24 against the home loan interest and Rs. 1.5 lakhs under section 80C of the Income Tax Act against the home loan principal.
5. File your income tax return within specified timelines
You must file your ITR before 31st July every year or the date communicated by the income tax department. Failing to file your ITR within the due date can attract needless penalties from the income tax department.
It helps to file your ITR on time as it is also essential for various other purposes, such as availing of housing loans, applying for immigration documents, conducting high-value transactions, etc.
Additional Read: ELSS vs PPF: Which is the better tax saving option?
The final words
Many taxpayers make frantic investments in tax-saving instruments during the end of the financial year to save taxes. However, this defeats the primary purpose of allowing such deductions to encourage people to invest for their future.
That is why the best time to make tax-saving investments is during the beginning of every calendar year or financial year. You can also invest regularly in various tax-saving avenues to save taxes and create wealth. However, you need to make sure that you understand all tax-saving investment options correctly and invest only in the right ones.
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