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How to Save Taxes and What are the Best Tax Saving Schemes?

How to save taxes in India 2023

How to save taxes in India 2023

 

 

We have compiled a comprehensive tax-saving guide to help you with your tax-planning journey.

 

Best tax saving methods to save taxes:

 

Tax Saving Schemes are the most effective way to save taxes in India by claiming deductions available under the Income Tax Act of 1961.

 

Investing in income tax deductions is a legal way to save money. These tax deductions are considered tax-saving schemes, which provide you with the best way to save taxes.

 

The following are some tax-saving schemes to be aware of:

 

Invest in tax-saving options – The most effective way to save taxes is to invest your hard-earned money in various tax- saving instruments. Tax deductions under Section 80C of the Income Tax Act (ITA) of India up to Rs 1.5 lakh are available. You have the option of investing in:-

 

1. Employee Provident Fund (EPF): EPF is a retirement savings plan for salaried workers. In this case, the employer deducts 12% of the basic salary and Dearness Allowance (DA). This money is then invested in government-approved provident fund schemes.

 

2. Public Provident Fund (PPF): Public provident fund is a government-supported investment with a minimum lock-in period of 15 years. After 7 years, you can withdraw a portion of your funds and earn an interest rate of around 8%.

 

3. 5-Year Bank Fixed Deposits (FDs): It is one of the most effective tax-saving schemes under Section 80C of the Income Tax Act of 1961. The invested amount cannot be withdrawn in the interim. The interest rate is higher than that of regular FDs. The interest earned at the end of the five years is fully taxable.

 

4. Equity Linked Savings Scheme (ELSS): ELSS is a  tax-saving mutual fund schemes offer tax savings and high market-linked returns. These have a three-year minimum lock-in period.

 

5. Sukanya Samriddhi Account: This government-backed scheme allows you to invest up to Rs 1.5 lakh per year. Being a parent of a girl child, you can open an account in her name and earn up to 8.5% interest.

 

6. National Saving Certificate (NSC): These have a 5-year minimum lock-in period. The annual interest payment of up to 8% is compounded.

 

7. Unit Linked Investment Plan (ULIP): A combination of investment and insurance is tax deductible. It protects against risk but does not guarantee returns. Depending on the scheme, returns can range from 5% to 11%. The maturity earnings are tax-free.

 

8. Tax Saving Fixed Deposits: These are similar to standard fixed deposits but have a 5-year minimum lock-in period. Interest rates can range between 7% and 9%.

 

9. National Pension Scheme (NPS) – This government-run social security programme provides retirement benefits to public, private, and unorganised employees. It has two accounts, Tier I and Tier II. The former is a required account that allows withdrawals only after retirement.

 

 

 

 

 

 

Steps for Income Tax Login

 

Step 1: Visit the income tax department’s homepage (government page) to access the Indian income tax login page.

 

Step 2: Enter your income tax login username and continue to move further. 

Note: for income tax login, the user ID is your valid PAN card number.

 

Step 3: Confirm your secure access message and enter the correct password.

 

Step 4: Enter the Basic Details (first, middle, and last name): select gender and residential status.

 

Step 5: Provide contact details

To complete the registration process, fill in the following details: valid Mobile number, Email ID, and Postal address details. After correctly entering all the details, click on ‘Continue’.

 

Step 6: Verification

A six-digit One Time Password (OTP) is sent to your mobile number and email ID on submitting the form. Enter OTPs correctly to verify the details successfully.

 

Step 7: Verify the details you entered.

 

Step 8: Set password.

After verification, set a strong password for your account and set up a secure login message

 

Step 9: Click on ‘Register’.

Click on the ‘Register’ button, and you will receive an acknowledgement number after a successful registration.

 

How to save tax on salary

 

You must first understand your current tax liability if you are a salaried individual with an annual net salary of between Rs 5 lakh and Rs 15 lakh. 

 

Once you have determined the amount of tax you must pay, you must plan to save tax by claiming tax deductions under the relevant provisions of the Income Tax Act. You can maximise your tax savings by investing in tax-saving options, making voluntary donations, taking out a home loan, or asking your employer to restructure your salary. Always plan ahead of time for tax savings, preferably at the start of the fiscal year, to avoid any stress or hassle when filing your annual Income Tax Return (ITR).

 

FAQs

 

 

Tax deductions are claims taxpayers make to reduce their taxable income due to various investments and expenses. However, the amount of tax you can save is determined by the type of tax benefit you claim.

 

 

The deduction is limited to the amount paid or deposited up to Rs. 1,50,000. The maximum deduction of Rs. 1,50,000 is the sum of deductions allowed under sections 80C, 80CCC, and 80CCD.

 

 

The tax – saving savings schemes cover EPF, PPF, ELSS, SSA, ULIP, NPS, FDs, and SCSS.

 

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