The income tax filing season is here and brings with it stress and confusion, yet it’s an essential responsibility to avoid potential legal actions.
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For salaried individuals, the prospect of filing ITRs comes hand in hand with a desire to minimise their income tax burden.
They are always on the lookout for ways to save tax within legal bounds. Indiatoday.in talked with experts to find out ways you save tax before you file your income tax returns for FY 2023-24.
5 ways you can save more tax
Public Provident Fund (PPF) – Dr Suresh Surana, Founder of RSM India, highlighted the importance of the Public Provident Fund (PPF). PPF, a government-backed long-term investment scheme, operates under the Exempt-Exempt-Exempt (‘EEE’) category. This means that contributions made to PPF accounts, the interest earned, and withdrawals from PPF are all tax-free.
“The interest rate for PPF is set by the government and is usually higher than bank savings rates. The current interest rate on PPF is 7.1 per cent per annum,” said Surana.
Equity-Linked Savings Scheme (ELSS) – Another tax-saving avenue discussed by Dr Surana is the Equity-Linked Savings Scheme (ELSS). ELSS is a mutual fund scheme primarily investing in the equity market. Investments made in ELSS funds qualify for deductions under Section 80C of the Income Tax Act, up to a limit of Rs 1.5 lakh per financial year. However, investors should note that such investments come with a lock-in period of 3 years.
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National Pension System (NPS) – Ashish Agarwal, Director at Acube Ventures, shed light on the National Pension System (NPS). NPS is a voluntary long-term savings scheme governed under Section 80CCD(1B) of the Income Tax Act. Contributions to NPS offer an additional tax benefit of up to Rs 50,000 over the current tax-free limit under Section 80C. Furthermore, upon maturity, 60 per cent of the corpus from NPS is tax-free.
Tax-Free Bonds – “The tax-free government bonds having the backing of the government is one more attractive investment idea,” said Agarwal. However, these bonds come with fixed maturity dates and are tradable on stock exchanges.
Sukanya Samriddhi Yojana (SSY) – Lastly, Agarwal highlighted the Sukanya Samriddhi Yojana (SSY), a savings scheme specifically designed for the benefit of girl children. Investments made under SSY qualify for deductions under Section 80C of the Income Tax Act. The interest earned and the maturity amount under SSY are exempted from taxation.
With the tax-filing season underway, taxpayers can consider these avenues to optimise their tax savings for the financial year 2023-24.
However, it’s advisable for individuals to consult with financial experts or tax advisors to determine the best strategies suited to their financial goals and circumstances.
