In this article, I will be discuss about few tax planning techniques which will lead you to same money by paying lesser tax and saving in interest and penalty.
Please note that all the ways discussed in this article are completely legal and in compliance with Income tax Act.
1. House Rent Allowance
Make rent agreement for HRA claiming when giving rent to parents/spouse/relatives etc. Remember If you miss to make the rent agreement you cannot claim benefit.
Deduction shall be allowed as per provisions given below:
Deduction is available for rent paid when HRA is not received. The taxpayer, spouse or minor child should not own residential accommodation at the place of employment.
The taxpayer should not have self-occupied residential property in any other place.
The taxpayer must be living on rent and paying rent.
The deduction is available to all individuals.
2. Medical expenses Take Term Insurance plan to cover your family if you have higher income. Keep hard copy and soft copy of all medical expenses bill for parents above 60 years not having medical policy to claim in section 80D Rs.50,000.
Section 80D of Income Tax Act, 1961
You (as an individual or HUF) can claim a deduction of Rs.25,000 under section 80D on insurance for self, spouse and dependent children.
An additional deduction for insurance of parents is available up to Rs 25,000, if they are less than 60 years of age. If the parents are aged above 60, the deduction amount is Rs 50,000.
In case, both taxpayer and parent(s) are 60 years or above, the maximum deduction available under this section is up to Rs.1 lakh.
3. Donation Save all donations receipt to claim benefit in 80G and 80GGC as the same does not reflect in AIS & TIS.
4. Deduction Under Section 80C Start an SIP in Equity Tax saver MF or PPF till March 2023 to cover deduction in 80C.
Section 80C also allows deduction for investment made in following:
PPF
EPF
LIC premium
Equity linked saving scheme
Principal amount payment towards home loan
Stamp duty and registration charges for purchase of property
Sukanya smriddhi yojana (SSY)
National Savings Certificate (NSC)
Senior citizen savings scheme (SCSS)
ULIP
Tax saving FD for 5 years
Infrastructure bonds
5. Annuity Pension Plans Section 80CCC allows deduction for payment towards annuity pension plans. Pension received from the annuity or amount received upon surrender of the annuity, including interest or bonus accrued on the annuity, is taxable in the year of receipt.
6. Gift without Clubbing
If you are in 30% bracket, Gift any assets generating income to family member without clubbing provision attraction to avoid 30% tax on it.
7. Job switch When switching job, ensure your new employer knows and consider previous earnings while calculating TDS or alternatively pay advance tax. Also if having other income, pay advance tax during year to avoid interest on late payment of Tax.
8. House property loss If you are paying EMI for the housing loan, it has two components: a. Interest payment b. Principal repayment
The interest portion of the EMI paid for the year can be claimed as a deduction from your total income up to a maximum of Rs 2 lakh under Section 24.
9. Capital gain loss setoff If there are long terms capital gains of more than 1 lac, check if you have any long-term losses in portfolio and book it before 31 March to take benefit of setoff of losses.
10. Using HUF Route
Sometimes opening HUF account for family and use for better tax planning and investment is a great tax planning trick.
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