Tax saving schemes to implement before March 31st
With proper tax savings, you can save more of your hard-earned money. As the financial year draws to a close, it is important to look back at your tax habits and check if you have missed out on any outstanding payments. The deadline to take advantage of various tax-saving schemes to maximise your earnings is March 31 .
In this article, we take a look at some last-minute strategies on how you can save taxes for the financial year ending March 31, 2023. Read on.
How to Save Tax Before March 31st 2023?
Here are some options that you can consider to save tax before 31 March 2023
Invest in ELSS Funds
Equity Linked Saving Scheme (ELSS) is a tax-saving mutual fund scheme that has a lock-in period of 3 years. By investing in it, you can claim tax deductions up to Rs. 1.5 lakh per year under Section 80C of the IT Act from your gross total income. However, to claim these deductions, investment needs to be done before March 31.
Although ELSS is known to yield high returns, it also has higher risk because it invests in equity shares.
Open a National Pension Scheme (NPS) Account
NPS is a tax-saving retirement fund that lets you create a pension corpus. When you exit the NPS on retirement, you need to buy an annuity plan with at least 40% of the accumulated corpus. Your own contribution and your employer’s contribution to NPS is deductible from your income. Your contribution is capped at 10% of your salary income up to Rs 1.50 lakh under section 80C.You can also claim additional tax deduction of up to Rs 50,000 under section 80CCD (1B), over the limit of Section 80C. If you are self-employed, 20% of the gross income can be claimed as a deduction.
Submit Proof of Investments to Your Employer
Don’t forget to submit proof of your tax-saving investments and payments before March 31. This way, your employer can deduct the correct amount of tax at source (TDS). It will help you avoid unnecessarily high deduction of TDS from your account. The proof may include rent receipts, travel expenditures, interest certificates, etc.Pay Your Advance Tax
If you are liable to pay advance taxes, you have to clear your income tax payments beforehand in instalments to avoid paying interest. Four days are allocated in a fiscal year for the completion of income tax dues. These four instalments have to be paid by June 15, September 15, December 15, and lastly by March 15, respectively. If there is any balance advance tax payable, after adjusting the TDS that may have been deducted, you can pay it by March 31It must be mentioned here that you need to pay income tax in advance only if you have an advance tax liability of more than Rs. 10,000 after considering the TDS deducted against your other incomes. In the case of failure to make adequate advance tax payment, you will be liable to pay interest on the unpaid advance tax amount at 1% per month or part of it.
Invest in Tax-Saving Schemes
31st March is also the deadline for investing in certain tax-saving schemes like Sukanya Samridhhi Yojana (SSY) and PM Vaya Vandana Yojana (PMVVY). Investing in SSY for a maturity period of 21 years for a girl child will allow you to claim tax deductions of up to Rs. 1.5 lakh per year under section 80C. On the other hand, senior citizens can apply for PMVVY, a insurance-cum-pension scheme to avail 7.4% interest per annum and save taxes.Additional Things to Do before March 31st
Here are some additional tax-related things you should complete before 31st March:
Make Charitable Donations
Section 80G used to be one of the best ways to save taxes in India. However, the new personal income tax regime will cut down on tax benefits that were previously available on charitable donations. Therefore, if you chose to pay taxes under the old personal income tax regime, and wish to avail tax deductions, you have to donate to some specified charitable institutions or relief funds before March 31, 2023.Remember that donations beyond Rs. 2,000 should be made via any mode other than cash to qualify for tax deductions.
Purchase a Life Insurance Policy
The new Budget 2023 excludes complete tax exemption on non-linked insurance policies like life insurance. In other words, post March 31, you will have to pay tax on returns from insurance policies if your yearly premium is above Rs 5 lakh.This new tax on high value insurance savings products will not be applicable in case the proceeds are received on death of the policyholder.
Also Read: Things to know before investing in Senior Citizen Fixed Deposit
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FAQs
What are some tax-saving investments that I can make before March 31st?
Taxpayers can choose from several tax-saving investments to get the maximum deductions. This includes Public Provident Funds (PPF), National Pension Scheme (NPS), Tax-saving FDs, etc. You can also refer to the provisions of Section 80C to check your eligible tax-deductible amount.
Can I claim tax benefits on health insurance premium payments?
You can claim tax benefits on health insurance premium payments under the old regime. However, if you follow the new regime, the provision for tax-free returns on insurance will cease after March 31st.
Can I claim tax benefits on education loan repayment?
Yes, you can claim tax benefits on education loan repayment. However, it only applies to higher education. Furthermore, the tax deductions are only available on payable interest and not on the principal repayment amount.
