Latest tax savings hacks that help me keep up my financial fitness!
The financial world is always evolving to adapt to the globe’s progress; this also implies that something new is continually happening without folks being aware of it. The concept of a new tax slab is well recognised by individuals in the upper echelons of society. In India, the literacy rate for such information is frequently poor.
It is preferable to educate them on what an income tax is and what it is for this year to assist them to grasp this. The new tax slab was not changed in the Union Budget 2022. In this manner, a person will understand what the tax system is and what the government intends to accomplish with it.
What is the new tax slab?
Individual taxpayers in India pay income tax based on a slab structure. The new tax slab system means that various tax rates are set for different income groups. It indicates that the tax rates continue to rise as the taxpayer’s income rises.
This sort of taxation allows the government to have progressive and equitable tax systems. These new tax slabs are subject to change with each budget. These new tax slab rates differ for various types of taxpayers. The New tax slab has defined three types of “individual” taxpayers, including:
- Individuals (aged less than 60 years) including residents and non-residents
- Resident Senior citizens (60 to 80 years of age)
- Resident Super senior citizens (aged more than 80 years)
Different Types of Incomes that are Taxable in India
Here is a comprehensive list of different types of incomes that are taxable in India:
1. Salary or Pension
This category of taxes often includes a person’s base income, perquisites, taxable allowances, and even any profit derived from their wage. This also implies that a person’s pension is taxed based on his or her income. Salary and pension income is then included in the calculation of taxable income.
This tax is often levied on the assumed and even actual revenue that a business or profession may generate. This might be charged at full capacity or as a supplementary and personal note. It is still counted as part of the taxable income. However, it is only done after modifications to the permissible deductions have been made.
3. House Property
As is typical with individuals who own more than one housing unit, renting it out is a simple method to generate extra money. However, ownership of the property remains in the hands of the original owner at the time.
Based on this premise, the owner is subject to income tax based on the amount of rent received. Any net revenue or loss created by this will be added to or subtracted from the income earned by the other properties.
4. Betting or Lottery
Though these are nonetheless taxable for income tax purposes and are added to a person’s total income. They are taxed independently. These forms of income fall into a separate category, with a distinct tax rate applicable and charged against them.
5. Capital Gain
These sorts of profits are often generated through the selling of assets such as real estate, gold, mutual funds units, stocks, and many others. It will then be classed as long-term or short-term capital gain based on the type of asset, how long a person has possessed it for, and the earnings produced on it. Even though these profits are subject to income tax, they are not included in the taxable amount that will be charged.
How to Save Tax in India?
We tend to spend on numerous products that improve our quality of life but can also cause considerable financial distress. To significantly alleviate this cost, the government assists in the form of income tax exemptions on direct new tax slabs payable on your entire wage.
1. Avail a Home Loan
Obtaining a house loan has two advantages: it reduces your tax obligation and gives you the joy of owning your property.
Many government-mandated programmes, such as the PMAY (Pradhan Mantri Awas Yojana) and DDR (Delhi Development Authority) Housing Scheme, aim to make housing cheaper in India, while Sections 80C and 24(b) minimize monetary obligation through lower tax burdens.
2. Buy a Health Insurance Policy
With rising medical expenditures in India, as well as poor health quality due to a variety of issues, health insurance is becoming increasingly important. In times of failing health, such income tax saving schemes alleviate financial hardship on individuals and their families.
The government provides tax breaks to encourage people to purchase such insurance policies, which allow them to receive high-quality care at prestigious medical facilities for little or no extra cost.
Individuals can claim tax deductions under section 80D for the percentage of their yearly taxable income tax saving schemes on premium payments. Depending on the age of the covered, different sums are exempted from such income tax computations.
3. Undertake Investments
Investments in the stock market and government-mandated income tax saving schemes can result in wealth building through better returns and tax benefits.
You may discover how to lower income tax in India by investing in various products under Section 80C.
If you are ready to accept the risk, you might choose stock market investment instruments such as ELSS (Equity Linked Savings Scheme).
4. Opt for Life Insurance Plans
Tax breaks are available on both premium payments and the amount given at maturity under life insurance contracts.
Section 80C of the Income Tax Act provides for premium payments, and Section 10(10D) provides for the sum promised received at maturity or early death of the insured, whichever occurs first.
Nonetheless, if the insurance is acquired after April 1, 2012, the new tax slab advantages of up to 1.5 lakh spent on yearly premiums can be claimed under Section 80C, provided it is less than 10% of the entire value guaranteed.
5. Donate to Charity
Donations given in cash to designated organizations are eligible for a tax exemption of up to $2,000 under Section 80G of the Income Tax Act. Wire and bank transfers, on the other hand, are free from taxes entirely or partially.
If you donate to an organization that promotes scientific research or rural development, you may be eligible for tax breaks under Section 80 GGA.
Wrapping It Up
With the advancement of technology, you may now purchase a variety of tax-saving financial goods online, saving both time and effort. Do not, however, invest in any financial or insurance product just to minimize taxes. It is OK to pay taxes when you are unable to invest in the appropriate investment product, but never invest just to save taxes under the new tax slab!