Income tax will be Zero on Salary: The new financial year is about to come. Start your financial planning from now.
Planning for income tax savings, planning for tax savings. If you make a strategy from the beginning then you will not have to think about saving tax at the end of the financial year.
But, one tension that comes with most taxpayers is where to invest money to save tax. Because the exemption in section 80C is only Rs 150000.
But, there is a way by which not only you will be able to save tax but will also be able to arrange a return on investment and pension after retirement. It refers to the National Pension System, which is also known as the New Pension Scheme.
A tool where double tax benefits can be utilized. Tax benefits are available of up to Rs 50,000. However, there’s an additional twist. Then you are thinking about what the twist is in investing. Yes If you invest in NPS with your company, you’ll receive more benefits..
Additional tax exemption will be available in 80CCD
When you invest in NPS You are eligible for tax exemption under section 80CCD in income tax.
There are two subsections: 80CCD(1) as well as 80CCD(2). In addition, there is a third subsection in 80CCD(1) and 80CCD(1B). Tax exemptions of 1.5 1 lakh in 80CCD(1) and 50 000 under 80CCD(1B). In addition to the exemption of Rs 2 lakh, tax exemption is also obtained by 80CCD(2)
How to get more tax exemptions?
The exemption will be offered upon investment in NPS made by the company.
The NPS is a benefit offered by employers. This tax-free benefit on investments into the NPS will be offered by your employer. 10 % of the basic salary and dearness allowances can be invested into NPS by the employer.
The central employees can also benefit from 14 percent of their salary being put into NPS. Tax exemptions are offered on the investment. Most companies provide NPS facilities.
It is possible to invest in NPS by contacting the HR department of the business. Its benefit is the tax-free benefits that are possible through this.
How to calculate tax?
If your earnings are 10 lakh rupees. The salary is taxable income.
However, you must remove the deduction of 1.5 lakh of 80C as well as 50 thousand in 80CCD(1B) of the overall amount.
Then, remove from the deduction standard of 50 thousand.
Your taxable income now is Rs 7.50 lakh.
If you’ve received a reimbursement of your salary from your employer You can also reduce tax to as much as 2.50 lakh by claiming reimbursements such as Broadband Allowance, Uniform Allowance, Conveyance allowance, Entertainment, etc.
After you claim reimbursement, your tax-deductible income will be around five lakh.
Income tax will be zero
Your income tax will become zero. In Section 80CCD(2) In the case that your employer invests through NPS by way of your job, you can invest up to 50, 000.
This way, the tax-deductible earnings of people who earn 10 lakh rupees will be decreased by Rs five lakh.
The rebate benefit can be claimed on tax-deductible income as per Section 87A. The tax rate on your entire income will be non-existent
Investment will be decided by basic salary
By investing in NPS through your employer, you can benefit from the maximum exemption available in Section 80CCD(2) from the Income Tax.
It is not possible to set a restriction on the amount you invest within this. However, the amount you invest will be determined exclusively on the basis of your base salary.
Tax Exemption – Section 80C
Individuals and Hindu Undivided Families may save a significant amount of tax by taking advantage of Section 80C. It allows tax deductions that range from to 1.5 1 lakh.
Numerous activities qualify for the deduction, including repayment of home loan interest, tuition fees for children, stamp duty and registration charges when purchasing a house, and Sukanya Samriddhi Yojana contributions.
Life Insurance
Individuals and HUF can take advantage of deductions for life insurance premiums that are paid for policies for their spouse, themselves, or their children.
However, corporations, partnerships, or corporate bodies are not able to take advantage of the deduction.
Premiums paid under Unit Linked Insurance Plans investments may also qualify as investment expenses and be claimed back as such.
Individuals can claim tax exemption on investments and savings made in Public Provident Fund, ELSS, NPS, and bank FDs. Contributions made can qualify for up to Rs 1.5 lakh of deduction each year; withdrawals on maturity can also be done tax-free.
People can claim tax exemption on home loan repayments and stamp duty and registration charges related to buying or selling real estate, as well as investments made into Sukanya Samriddhi Yojana (investment scheme for girl children’s future).
ELSS
ELSSs qualify for tax deduction under Section 80C and typically provide higher post-tax returns compared to PPFs and ULIPS, for instance. By investing regularly or via automated systems, investing in ELSS can help you reach your financial goals over time – while alleviating some stress by eliminating the necessity of investing a lump sum at year’s end which can often prove challenging to manage.
However, it should be remembered that ELSS investments come with a three-year lock-in period – meaning any funds redeemed before this deadline cannot be withdrawn – as well as being taxed at a long-term capital gains rate of 10% on any gains over Rs 1.5 lakh.
Nonetheless, this can still provide individuals looking to save taxes while building wealth an excellent way to do just that.
PPF
PPF accounts provide low-risk investment options that offer tax exemptions of up to Rs 1.5 lakh annually, making them suitable for risk-averse investors as well as long-term investors looking for tax-free returns on interest accrued and maturity proceeds. It should be noted, however, that before the completion of its full tenure, you cannot withdraw money from an account.
ELSSs are another popular investment choice, which combines investment and life insurance benefits into one investment vehicle.
They qualify for 80C tax deductions up to Rs 1.5 lakh annually but must remain invested for at least three years to be eligible. NPS is another government-backed retirement savings plan eligible for tax deductions up to Rs 1.5 lakh per financial year; income and interest earned via this account remain completely tax-free.
Other expenses and investments eligible for tax exemption under Section 80C include tuition fees for up to two children, principal repayment of home loans, stamp duty/registration charges, and life insurance premiums.
Individual taxpayers and Hindu Undivided Families may claim these deductions; corporate bodies cannot.
NSC
NSCs are an easy and secure investment that can help you save tax while reaping steady returns over time.
Offering fixed maturity periods, when withdrawing principal and interest you receive both simultaneously. Plus, their interest compounded annually furthers your savings!
NSC investments provide an excellent way to reduce tax liability each year; you can invest up to Rs 1.5 lakh each year using this vehicle and benefit from tax deductions under Section 80C for principal contributions, while interest earned is taxed at an individual investor’s applicable slab rate.
Other investments and expenses eligible for tax deduction under Section 80C include paying off your home loan, tuition fees for children, stamp duty and registration fees on property purchased, as well as premiums paid for medical insurance policies – these may all qualify. Individuals and Hindu Undivided Families (HUFs) alike are eligible. Finally, premiums paid under Section 80D provide for additional tax savings.
Tuition Fees
Tuition fees paid towards the education of one’s children qualify for tax deduction under Section 80C of the Income Tax Act, giving parents an added incentive to invest in their kids’ education while saving taxes at once.
But before making claims on tuition fees there are a few key points they need to remember before claiming them as deductions.
Taxpayers may claim up to Rs 1.5 lakh annually under Section 80C as expenses and investments, including tuition fee deductions for up to two children attending full-time education at any educational institution in India such as universities, colleges or schools; this deduction does not apply for coaching classes, development fees or donations.
To qualify for this deduction, individuals should submit the fee receipt from their child’s school or university before the end of the financial year. It could be beneficial to speak with an expert in taxation or a financial advisor to fully understand and adhere to the tax laws.