Tax Planning Strategies
Tax planning is an important aspect of personal finance that can help you save money and avoid penalties. Linking tax planning with your goals is important because it allows you to align your financial decisions with your overall financial objectives. By considering your goals when making tax-related decisions, you can ensure that you are making the most of your money and taking advantage of opportunities to save on taxes. Here is an understanding of sections available in India for claiming rebate. We will make sure that by the end of this blog you have a basic understanding of tax planning.
Section 80 D can save up to 75,000* directly:
Medical insurance, also known as Mediclaim, is an insurance policy that provides financial coverage for medical expenses. It is important because it helps individuals and families financially protect themselves against the high costs of medical care. Besides being the most important inclusion for your risk management portfolio it also benefits in your tax planning.
Individuals can claim a deduction of up to Rs. 25,000 for health insurance premiums paid for themselves, their spouse, and dependents. If the parents are less than 60 years of age: Individuals can claim a deduction of up to Rs. 25,000 for health insurance premiums paid for their parents. If the parents are senior citizens (60 years and above): Individuals can claim a deduction of up to Rs. 50,000 for health insurance premiums paid for their parents.
Investment in NPS benefits for 50,000 under section 80CCD (1B):
National Pension System (NPS) is a retirement savings scheme offered by the Government of India that can be useful for tax planning. Under section 80CCD (1B) an additional deduction of Rs. 50,000 is allowed for investment made in NPS over and above the limit of Rs 1.5 Lakhs under section 80C. NPS is a long-term savings scheme that can help individuals plan for their retirement.
Avail HRA Exemption benefit under section 10(13A):
HRA can be a useful tool for tax planning because it allows employees to set aside pre-tax dollars to pay for qualified medical expenses. HRA (House Rent Allowance) exemption benefit comes under Section 10(13A) of the Income Tax Act. This can lower an employee’s taxable income and help them save money on their taxes.
Avail Standard Deduction of 50,000 under Section 16:
It was introduced in the financial year 2018-2019 by the Indian Government to provide relief to the salaried taxpayers. The standard deduction is a fixed amount that is deducted from the taxable salary income of an individual. The current standard deduction limit for the financial year 2021-22 is Rs. 50,000. This means that an individual can claim a deduction of up to Rs. 50,000 from their taxable salary income, regardless of the amount of actual expenses incurred by them. In conclusion, remember to keep detailed records and consult with a tax professional if you have any questions or concerns. With the right planning and preparation, you can make tax season a little less stressful and a lot more profitable.
