Save Majority of My Taxes, and You Can Too!

Tax

If you consider ways to save on taxes, it is important to understand the different tax slabs. Taxpayers are categorised into different income tax slabs depending on an individual’s annual income.

Taxpayers can either invest their finances in markets and insurance or put them in saving instruments for the future. Moreover, they can also use the different allowances to save their taxes. Below we have given some insight on ways to save taxes.

Several tax-saving schemes help you with your tax planning – some of them come with an E-E-E (i.e., investment, accumulation and withdrawal are all tax exempted) status. In contrast, some others allow tax deduction claims. Under Section 10 of the Indian Tax Act of 1961, incomes with no tax liability are found, and tax deductions are provided under Section 80C.

In this article, we will be looking at various tax saving schemes.

Tax Slabs for taxpayers

Following are the tax slabs for various categories.

  • Individuals

Income range 2022-23
Tax rate
Up to Rs. 2,50,000
Rs. 2,50,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
  • Senior Citizens

Income range 2022-23
Tax rate
Up to Rs. 3,00,000
Rs. 3,00,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
  • Super Senior Citizens

Income range 2022-23
Tax rate
Up to Rs. 5,00,000
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
  • Hindu Undivided Family

Income range 2022-23
Tax rate
Up to Rs. 2,50,000
Rs. 2,50,001 to Rs. 5,00,000 5%
Rs. 5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

Tax saving schemes

Now that we understand the tax slabs, let’s look at the best ways to get an income tax return.

There are many options, and it may get overwhelming to choose from them. Hence to help you out, I will be providing the best tax saving schemes in India.

1. Insurance 

Insurance is one of the best ways to get an income tax return. It protects from unfortunate events and gives good tax-saving benefits.

Insurance can be divided into three types

  • Life insurance 
    To avail of life insurance, you must pay monthly premiums. The sum assured is provided to the nominee upon the policyholder’s demise.
    The premium paid for life insurance is liable for tax deduction under section 80C of the income tax act.
  • ULIPs
    It is a scheme that benefits you from insurance and wealth creation. A part of the premium paid is put into equities that give a good chance of creating wealth. Policyholders can avail of the premiums paid towards ULIPs for a tax deduction.
  • Medical or Health insurance
    The recent pandemic has shown the world the importance and necessity of having good medical insurance. The expense of hospitalisation can burn through the life savings, but with the help of health insurance, you can get reimbursement and tax benefits based on your age.

    If you’re not a senior citizen, you get tax benefits up to ₹ 25,000, and if you’re a senior citizen, it increases up to ₹ 50,000

2. PPF

Public Provident Funds is one of the best ways to save taxes. The PPF falls under the exempt-exempt-exempt category. It makes the interest, sum received after maturity, exempt from tax.
Also, you get the benefit of availing ₹ 1,50,000 per financial year under section 80C of the income tax act. Apart from the tax benefit, you also get a handsome 7.1 % interest on the investment done in PPF.

For example, if one is in the highest tax bracket (30.9%), one gets a tax return amounting to 11.28 per cent, saving an enormous amount.

3. Sukanya Samriddhi Yojana

If you are a parent of a girl child, then Sukanya Samriddhi Yojana is a must invest scheme for you. This scheme aims at providing a better life to the girl child. This scheme qualifies for a tax deduction of up to ₹ 1,50,000 per financial year under section 80C of the income tax act.
Parents can only use the amount accumulated under the scheme for higher education expenses. It matures after 21 years of starting the scheme. SSY provides the highest rate of return of 7.6% (as of 2022) among all the schemes present in India.

4. National Pension Scheme

NPS is an excellent way of getting more deductions for the income tax.
By contributing only ₹ 50,000 to the scheme, you become eligible for an extra ₹ 50,000 tax rebate on your income tax.
The best part about NPS is a lock-in period of 60 years. It helps in building financial discipline. The national pension scheme gives you the option of investing up to 75% of the contribution in the equities.

Hence it provides a chance to grow your investment and a way to save extra on your income tax.

5. Home loans and Tax savings

Under section 80C of the Income Tax Act, up to Rs1,00,000 in principal and interest can be claimed as a tax deduction, and Homebuyers can claim up to Rs1.5 lakh in appeal under section 24.
First-time homebuyers are entitled to a tax deduction of up to 50,000 rupees under Section 80EE. Additionally, if one lives in the residence on which they took out their first home loan, they may qualify for a second mortgage.

Almost no one knows that home loans taken for reconstruction and renovation are also eligible for the tax deduction, even though many people know that home loans for construction are.

Final Words

By investing in tax-saving schemes, you get a good income tax return. All you need is the knowledge and the working of schemes available in the market.
One must take the safety, liquidity, and lock-in period of the tax-saving instrument into consideration as well.
Your goal is not only to save the tax but also to get some good returns on it.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.