How to plan early for better tax savings in 2022
Without tax planning, taxes such as GST and income tax might cut your annual profits. Tax planning is a reasonable strategy to reduce your tax responsibilities in any fiscal year to counterbalance this. It assists you in making the most use of the tax exemptions, discounts, and perks provided by the government to minimize your burden and also helps in wealth management.
The importance of tax planning is that it helps in reducing the chances of tax litigation, reduces tax liabilities such as GST, ensures productivity and economic stability. The most straightforward and efficient approach to saving taxes is creating and adhering to a financial plan every time your income changes, and the plan will act as one of your wealth management systems.
The outset of the fiscal year is the best time to prepare for schemes for tax savings. It ensures that you do not pay additional taxes and save money in India and get rewards for investment in various schemes for tax savings.
Tax Saving Schemes
Given below are some tax saving schemes that can help you plan your taxes:
1. Public Provident Fund
The Public Provident Fund has consistently been one of the taxpayers' most attractive tax-saving plans. One of the main reasons for its popularity is that PPFs are exempted from taxes. You can open PPF accounts at a banking institute or a postal service.
Individuals can claim a tax deduction for the invested amount during the fiscal year under Section 80C of the Income Tax Act. A deduction of up to Rs 1.5 lakhs is possible. Because PPF comes within the excluded category, the interest and maturation amount are tax-free.
PPF accounts have a 15-year lock-in term and provide investors with the following alternatives at the end of the specified period:
- Withdraw from the account.
- Extend the scheme further for five years.
2. Sukanya Samridhi Yojana (SSY)
Sukanya Samriddhi Yojana was launched by the government of India introduced in 2015 as part of the Beti Bachao Beti Padhao initiative. In this scheme, the taxpayer pays a fixed amount of money every month while earning interest. Investment in the Sukanya Samriddhi Yojana is also deductible under Section 80C of the Income Tax Act.
The interest rate is determined quarterly by the government of India and is paid at maturity. The program has a 21-year lock-in term and will mature when that period expires.
A minimal deposit of Rs. 250 is needed every year for 15 years. Failure to pay the necessary amount per year will disconnect the account. To restart the account, you have to pay a penalty of Rs. 50 along with Rs. 250.
3. National Saving Certificate
A National Savings Certificate is a fixed income investment scheme that encourages small and middle-income individuals to invest and receive substantial returns. The investment has low risk, and investors can invest in it based on their income and investment habits.
Investment in NSCs entitles you to a tax exemption of up to Rs. 1.50 lakh. Apart from tax benefits, it also provides the investor with total capital security and assured interest. The following are some of the benefits of the NSC tax-saving option:
- Annual interest of 6.8%.
- Investment is low as Rs 1,000.
- You cannot terminate the scheme early. In bank or NBFC loans, you can utilize collateral security.
Tax planning is important to the growth of personal finance. Thus, if you are unclear about how changes in taxes like GST and income tax impact your taxes or which investment strategies you should employ to reduce them, you should check out OAWA, as they provide several online courses in wealth management. You can develop several wealth management systems to reduce your tax liabilities with the proper knowledge.