With the new financial year approaching, it's important to start thinking about ways to save taxes. Income tax is also a crucial aspect of financial planning for working professionals in India. The lesser tax one has to pay, the more disposable income one has. While taking advantage of tax-saving options available, one can save a significant amount of taxes.
Let's look at some key tips for working professionals on how to save on taxes in 2023 (Compiled by Rajiv Bajaj, Chairman & MD, Bajaj Capital Ltd.):
Understand tax slabs
The
Indian income tax follows a slab-based system, where different tax rates are applied to different income ranges. It's important to understand these tax slabs and your tax liability to plan your tax savings effectively.
Salaried people should further identify
which tax regime is good for them (the old one or the new one). For better tax management, investors should calculate their tax liability under both tax regimes and opt for one involving the least tax outgo.
Budget 2020 introduced a new tax regime with a lower tax rate in the interest of those unable to avail of benefits under the older tax regime. However, this regime is optional.
Make use of tax-saving investments
There are various tax-saving investments options available such as Public Provident Fund (PPF), Equity-Linked Saving Scheme (ELSS), and more. These investments not only help you save on taxes but also help you build a corpus for your future.
Take advantage of tax deductions
There are several tax deductions available under the Income Tax Act, such as Section 80C, Section 80D, and Section 80E. These deductions can help you save a significant amount of taxes, but it's important to be aware of the limits and conditions for each one.
Claim tax credit for charitable donations
Donations made to certain charitable institutions are eligible for tax credits. It's a good idea to make donations to these institutions and claim the tax credit.
Keep all your documents ready
In order to claim deductions and credits, it is important to keep all the necessary documents ready. This includes proof of investments, donation receipts, rent agreements, and more.
(Edited by : C H Unnikrishnan)
First Published: Jan 30, 2023 3:35 PM IST
