We just have few days left in the current financial year and it is the time when we should get ourselves free from the daily chores to determine our tax liability. It is the time ask ourselves a question, have we done enough to optimize our tax outgo and maximize our tax savings? Believe it or not, most of us find out that there is still some effort left for the tax outgo optimization which calls for those last-minute investments. Tax optimization not only saves money in the present but also, with the right choice of investment instrument, leverage your efforts for building wealth for a financially secure future.
We generally tend to adjourn the steps required to take advantage under income tax to the last minute in spite of being conscious about the deadline which is March 31 every year. We are well aware of the fact that financial year (2020- 2021) has been difficult for us due to the COVID 19 Pandemic and its consequent lockdown. The lack of awareness about the plenty of practices which can save us from paying income tax at the last minute, results in the common mistakes by the taxpayers and being penitent about it.
For being sure that you make maximum savings on your income this tax season, stick to these last-minute tax-saving tips by Neil Karia, Chief Financial Officer Aviva Life Insurance:
Before starting with the filing process, it is advisable to go through the tax regulations for the assessment year. There can be changes and new amendments which are pre-requisites for correct computation of right tax liability. The returns will depend upon the slabs under which the returns have been filed.
Identify the right Tax Filing form
There are seven ITR filing forms introduced by the I-T department. Therefore, it is key for one to know which form is to be used for the filing process. While it can be easily demarcated on the portal, however, it is essential to know about the different forms and its respective categories to ensure the filing procedure is accurate. Also, it enhances an individual’s know-how about the financial processes of the nation.
Keep Yourself and Your Family Secure with Proper Insurance Cover
Apart from personal expense, there are other investment options like ULIPs and conventional insurance plans to save tax. If you want to enjoy dual benefits of life insurance and market linked wealth accumulation, ULIP is the product for you. This kind of plan give you the option to invest in both equity and debt markets. As a consequence, they deliver better returns than other tax saver products. Simultaneously, the importance of selecting the right insurance policy cannot be ignored as they are intended to provide the proper risk cover. You can also choose health insurance which is another crucial investment. These plans provide you financial protection at the time of hospitalization and in addition to this it enables you to save tax under Section 80D of the Income Tax Act which allows you a deduction of up to Rs 25,000 for premiums paid and Rs 50,000 to people above the age of 60 years.
Save Tax, Invest Online, Release Worries and Utilize Section 80C
The Section 80C of the Income Tax Act not just allows you to save tax but also ensures that you are actively planning for your financial goals. It does this by offering a wide range of available financial instruments and by investing in the right instruments you can get tax deductions of up to Rs 1.5 lakh and make investments of the total amount. You have the option to choose for investments in Public Provident Fund (PPF), National Saving Certificate (NSC), Bank Fixed Deposits (FD), Life Insurance plans etc. You should opt for online investing as it ensures efficiency, seamless procedure and avoids any last-minute panic.
Apart from Section 80C and 80D, There Are Other Sections to Invest In
Don’t limit your investments to Sections 80C and 80D. There is a plethora of other relatively less popular investment options which let you save on your income tax. If you invest under National Pension Scheme it will give you extra benefit of Rs. 50,000. Moreover, your employer can contribute up to 10% of the basic salary and you can enjoy deduction for this contribution. These deductions are over and above 80C, 80CCC and 80D deductions. It has become very essential to plan for post-retirement during the active working times due to the increase in life expectancy. Tax deductions benefit of up to Rs. 10,000 is allowed under section 80TTA on interests on your savings bank account.
Claim Leave Travel Concession Without Travelling
Due to the Coronavirus Pandemic we were forced to cancel our travel plans and were locked down at our places and for claiming Leave Travel Concession (LTC), one is required to travel within India. Government has come out with a scheme as a solution for this. Now a person can spend 3 times of his/her LTC eligibility on goods and services where GST rate of 12% or more is applicable. All the eligible spends between Oct 12, 2020 to March 31, 2021 will qualify for this benefit. One need to ensure to pay for goods and services using digital means like credit card, cheque etc. Spend using cash or where GST rate is less than 12 percent won’t qualify. This benefit is available to Govt as well as private sector employees. New Insurance policies taken during above period will also qualify for the benefit.
Donation to Charity
Section 80G lets you avail the benefit of saving money that is donated to a certified charity. This shall be validated only when the certificate from the charity organisation is kept responsibly as a proof.
E-Filing is Easy Filing
Salaried employees can visit the Income Tax Department website to file their returns which has increased the magnitude of ease. If the filers are short of time or have any difficulty in filing returns, they can also seek help from financial consultants/advisors. Moreover, the new system by IT department has now enabled quicker refunds.
Some of the key documents to keep in mind for ITR filing
· PAN card: individual’s professional identity
· Aadhaar card
· Form 16 from the employer/ employers in case of shifts in employer
· Use Form 26AS
· Proofs/ details of assets if case of income exceeding INR 50 lakh
· Bank statements
· Investment Proofs
Steer clear of Misrepresentation of Facts
It is essential to avoid misinterpretation of facts and procedures. Wrong facts, without any doubt, lead to a faulty computation of tax liability. It is important to be honest, and careful, especially to know that the data will be shared with the Government of India. One should try to be safe from tax saving tips/investment options set by unscrupulous/unauthorised wealth managers.
Income Tax Filing starts with such small steps and is crucial in making one financially responsible. With making the right decisions it also builds up one to know more about investment options.