6 Awesome Tips on Tax Saving

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With the present recessionary trend that has made many persons jobless, it is very important to save every penny possible. The earlier you start saving for your future, the better off you’ll be come retirement time. Here are some tips on Tax Saving:

1. Make 100% use of Your Company Provident Fund(PF) Account – If not 100%, try to contribute at least 10% towards your PF account. Employers do match a certain % of what you put into this account and hence form a part of your savings as well as an insurance cover in case, God forbid something were to happen to your income or employment status.

2 . Don’t forget about Other Compulsory Employee Benefits – In addition to your Provident Fund, you will also have an additional Employee Pension Scheme (EPS) contribution that your employer is required to make for you. This could be 8% of your salary/wage or Rs 1500 per month, whichever is lower. These are contributions from the employer on your behalf towards a pension plan. The rules surrounding EPS are different for government employees and non-government employees working in private organizations or establishments

3 . Understand How much Tax You’ll Pay – This may require some work on your part but is well worth it. Get hold of last year’s payslip(s) or Form 16A if available and look at how much tax was deducted as evidenced by the number appearing against TDS in Box 12 of last year’s Form 16A. This would provide a good idea of what you can expect as tax deductions this year, on account of your increased salary/wage income.

4 . Claim as Many Deductions as Possible – In addition to the tax deduction that arises from TDS your employer makes, you have some other deductions which may be available to you. These can include home loan interest paid for self-occupied house property, some part of medical care expenses, and educational expenses if the expense is incurred for a child who still needs to complete his or her education, etc. You could also claim a certain amount towards furniture and office equipment purchase towards office use under section 80C of the Income Tax Act. If you are planning on buying new equipment for your home office, you could always opt to buy it in June this year instead of waiting until the following financial year.

5 . Avoid Miscalculated/Incorrect Tax Payments – You can avoid miscalculated tax payments by being absolutely clear about which income is exempt from taxation and which is not. For example, if your total income for a particular financial year amounts to Rs 1 crore and out of this contribution towards Provident Fund comes to Rs 65,000, then it would be necessary for you to declare only the balance amount as taxable salary/income as long as you have an appropriate certificate from your respective employer as proof that these deductions were actually made on your behalf. In case there are any basic components of pay that have been excluded, you may have to file an amendment of return for AY 2021-22.

6 . Ensure your Accounting Records are in Order – If you get assessed by the Income Tax Department, they will not only look at last year’s salary but also all previous years’ salary/income records. Having accurate records of your income and expenses is therefore very important even if you were not required to file returns earlier (you would still need them). There are some deductions that can be claimed for up to 7 prior years which means that it is best to start with the oldest possible assessment year when conducting a search on past tax deductions available.

As you can see, there are numerous ways through which you could save taxes. Not only do these strategies help you save some money but they are also good for your financial wellbeing in the long run.