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How to minimize the tax burden in 2022?

Talking about tax savings is a crucial part of financial planning. Financial planning when done right you can’t go out of budget. Managing taxes is a part of it. A perfect strategy that helps you to manage your finances is much needed. This helps individuals to reach their financial goals and save their taxes.

Here are simple ways to minimize your tax burden on investments-

When the limit is 1 Lakh

Under sections 80C, 80CCD, and 80CCC, there can be a deduction of Rs 1 Lakh. Various funds options are:

Public Provident Fund (PPF)

If you are residing in India, you can invest in PPF. If living in a joint family one can contribute. Also, an individual can invest in family. The annual interest PPF offers is up to 8.7%. The interest you get is free of tax.

Senior Citizen Scheme (SCSS)

Above 60 or ones who have taken early retirement at 55, can contribute to SCSS. The time for investment is of 5 years. You can extend for 3 years. The deposit is only in 1000’s multiples. The rate of interest offered is 9.2% annually. There is a tax on the interest.

Employee Provident Fund (EPF)

12% of your salary deposit is the minimum in EPF. It comes under section 80C. Under certain rules and regulations, premature withdrawal is accepted. If an early withdrawal is done, one loses all the benefits on tax.

National Savings Certificate (NSC)

The investment year ranges from 5 to 10. NSCs of 5 years offer interest of 8.5%. Whereas NSC of 10 years offers interest of 8.8%. You need to pay tax on the tax you get. Any amount can be invested. But, the tax benefits are available only on the limit equal to or more than 1 lakh.

When the Limit is above 1 lakh

Employer’s NPS contribution

One can contribute to NPS when you and your employer both are investing 10% of your income. The value must be above 1 lakh.

Rajiv Gandhi Equity Savings Scheme

The first investment can be Rs. 50,000. This can be done by investing in mutual funds and stock markets. One gets up to a 50% of tax reduction. In order to avail of this scheme, your income must not be more than 12 lakh per year. The scheme period is of 3 years.

Health Insurance Premium

Section 80D allows you to deduct the cost of healthcare for yourself, your spouse, your children, and your parents. Senior citizens have a limit of Rs 20,000, while others have a restriction of Rs 15,000 rupees. You can claim up to Rs 20,000 in the case of senior persons and up to Rs 15,000 in other circumstances if you pay health insurance premiums for your parents. Expenditure for preventive health exams up to Rs 5,000 is also taxable within this amount.

Interest paid on Education loan

Interest paid on a student loan to fund the college education of the individual, wife, kids, or a person over whom the individual has legal guardianship is taxable under Section 80E. Under this clause, loans received to fund any normal or professional program are also acceptable. The deduction lasts for 8 years or until the tax is fully paid, whatever comes first.

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