Quick tips for tax-payers to save tax this season

By: |
March 17, 2021 6:57 PM

The reason that tax optimization is the smart thing to do is that it not only saves you some money in the present in the way of tax savings, it can also help you build wealth for your future financial goals if you choose the right investment instrument.

Income tax, Income tax savings, Income tax news, Income tax savings news, Income tax saving scheme, Last minute tax saving, Five mistakes to avoid, NPS, PPF, FDUnder Section 80TTA, tax deduction benefit of up to Rs 10,000 is allowed on interests on your savings bank account.

With just two weeks left in the current financial year, it is that time when many of us sit back to determine our tax liability. It is time to check whether we have done enough to optimize our tax outgo and maximize our tax savings. More often than not, many people discover that there is still some room left to make those last-minute investments in order to reduce their tax outgo. The reason that tax optimization is the smart thing to do is that it not only saves you some money in the present in the way of tax savings, it can also help you build wealth for your future financial goals if you choose the right investment instrument.

Every year, the last date to make our tax-saving investments is March 31. Despite being aware of this deadline, we postpone the steps necessary to take benefits under income tax to the last minute. The financial year (2020-21) has been tough due to COVID-19’s impact and many lost their jobs or suffered salary cuts. There are various ways to save yourself from paying income tax at the last minute but due to the lack of knowledge or awareness, in a hurry to meet the deadline, many tax-payers end up making some common mistakes only to repent later.

Here are some last-minute tax-saving tips to ensure you make the maximum savings on your income this tax season:

Make The Most Of Section 80C by investing online – Save Tax and drop worries

Section 80C of the Income Tax Act allows a tax deduction of up to Rs 1.5 lakh and allows you to make investments of the total amount through a wide range of available financial instruments. Investing in the right instruments not just allows you to save tax but also ensures you are actively planning for your financial goals. You may opt for investments in Public Provident Fund (PPF), National Saving Certificate (NSC), Bank Fixed Deposits (FD), Life Insurance plans etc. You should invest in products that you require and not just for the sake of investing, and opt for investing online as it ensures efficiency and avoids last-minute panic. While offline payments leave chances of things going wrong, like a bounced cheque for instance, online transactions ensure a seamless procedure and avoid any last-minute crisis.

Ensure Adequate Insurance Cover For Yourself And Your Family

There are many investment options like ULIPs and traditional insurance plans, to save tax apart from personal expenses. A ULIP is an investment product that offers you the dual benefits of life insurance and market-linked wealth accumulation. Moreover, since these plans have the option to invest in both equity and debt markets, they have the potential to deliver better returns than other tax-saving products. At the same time, it is very important to select the right insurance policy as the purpose of a good insurance policy is to provide adequate risk cover. Health insurance is another crucial investment you can choose. The right health insurance plans not only enable you to save tax under Section 80D of the Income Tax Act, but also provide you financial protection at the time of hospitalization. Section 80D allows you a deduction of up to Rs 25,000 for premiums paid and Rs 50,000 to people above the age of 60 years.

Invest In Other Sections Apart From Section 80C And 80D

Your investments should not be limited to only the sections. There are multiple lesser-known investment options that allow you to save on income tax like Section 80CCD. Investment under National Pension Scheme gives you additional benefit of Rs. 50,000. Your employer can also contribute upto 10% of basic salary and you will get deduction for this contribution. These deductions are over and above 80C, 80CCC and 80D deductions. With the increase in Life expectancy, it is prudent to plan for post retirement years during active working life by investing in appropriate pension products. . Additionally, under Section 80TTA, tax deduction benefit of up to Rs 10,000 is allowed on interests on your savings bank account.

Make The Most Of LTC Without Travelling

In order to claim Leave Travel Concession, one is required to travel within India. Due to Covid 19, many people had to postpone their travel plans. To ensure that people don’t lose the benefit of LTC due to their inability to travel, Government has come out with a one-time scheme wherein a person can spend 3 times his/her LTC eligibility on goods and services where GST rate of 12% or more is applicable. All the eligible spends between Oct 12, 2020, to March 31, 2021, will qualify for this benefit. One need to ensure to pay for goods and services using digital means like a credit card, cheque etc. Spend using cash or where the GST rate is less than 12 per cent won’t qualify. This benefit is available to Govt as well as private-sector employees. New Insurance policies taken during the above period will also qualify for the benefit.

Donation To Charity

As per section 80G, you can avail of the benefit and can save the money which is donated to a certified charity. The certificate from the charity organisation is validity which should be kept responsibly as proof.

E-Filing

The magnanimity of ease has increased manifold with the introduction of online filing at the very outset. Salaried employees can visit the Income Tax Department website and file their returns. In scenarios of an absolute time crunch, one can also seek help from financial consultants/advisors. However, with the multitude of available e-filing portals, it is possible for every individual to own up the task. Additionally, the new system by the IT department will now enable quicker refunds.

Some of the key documents to keep in mind for ITR filing
PAN card: individual’s professional identity
Aadhaar card
Form 16 from the employer/ employers in case of shifts in employer
Use Form 26AS
Proofs/ details of assets in case of income exceeding INR 50 lakh
Bank statements
Investment Proofs

Avoid Misrepresentation Of Facts

It is important to be honest, and careful, especially to know that the data will be shared with the Government of India. In case of misrepresentation of facts which is more prevalent amongst those who have changed jobs in between, wrong facts will undoubtedly lead to a faulty computation of tax liability. Therefore, it is advisable first to collect all the information and then sit at ease to start the process. Avoid tax-saving tips/investment options set by unscrupulous/unauthorised wealth managers.

Income Tax Filing is pivotal in making one financially responsible, and it only starts with such small steps which build up one to know more about investment options.

by Neil Karia, Chief Financial Officer Aviva Life Insurance

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