Tax Saving Schemes & Investments for FY 23-24

Tax saving refers to the lawful strategies and methods that allow individuals and businesses to reduce their overall tax liability. The primary goal behind “How to Save Income Tax” is to take advantage of legal provisions, deductions, exemptions, and incentives provided by the tax laws to minimise the amount of income that is subject to taxation.

You as an individual can engage in tax-saving activities through various tax saving options involving - investing in tax-efficient instruments, claiming eligible deductions, and making strategic financial decisions.

In short, tax saving is about making informed choices to keep more of what you earn.

Understanding the Taxation System in India

India's tax system is a complex framework that plays an essential role in promoting economic growth and providing revenue to the government. The system, which consists of direct and indirect taxes, is intended to ensure that the tax burden is shared fairly and equally among individuals and businesses.

In the past few years, the country has seen significant reforms in the taxation system, with the most notable being the introduction of the Goods and Services Tax (GST), which aims to simplify the indirect tax system.

Types of Taxes

The taxation system of India divides tax into two categories which are as follows:

• Direct Taxes: Direct taxes are taxes that are imposed on a taxpayer’s income and are paid directly by them to the government. Individuals and businesses are themselves responsible for paying these taxes, and they cannot shift this burden to others.
  
  
• Indirect Taxes: As the name suggests, Indirect Taxes are pretty indirect and aren't deducted directly from your income. Instead, they are added to the cost of things you purchase. While businesses collect indirect taxes from consumers, they act as intermediaries passing on the burden to the end consumer.

While direct taxes are like a direct deduction from your income, indirect taxes subtly add to the expenses of the things you buy.

Old Tax Regime Vs New Tax Regime

In India, the old taxation system uses a progressive structure and involves multiple tax brackets. It moreover allows various deductions and exemptions that can help you lower your taxable income. In contrast, the new tax system offers reduced and quite simplified tax rates while removing many deductions and exemptions.

NOTE: Taxpayers are advised to choose between these two systems depending on their financial preferences and circumstances.

For better understanding, we have included a tabular differentiation below:

Aspects	Old Tax Regime	New Tax Regime
Income Tax Rate	Higher and progressive	Lower and fixed
Exemptions and Deductions	Involves multiple deductions and exemptions	Involves limited deductions and exemptions
Complexity	Complex due to numerous exemptions	Simplified due to fixed rates
Flexibility	More flexibility for customisation is available	Less flexibility is available due to limited deductions
Long-Term Implications	Historically shaped by a progressive tax system	Aims for long-term simplicity

Income Tax Slabs Under Old and New Tax Regime

Old Tax Regime

Income Slab	Income Tax Rate
Up to Rs. 2.50,000	Nil
Rs. 2,50,001 to Rs. 5,00,000	5%
Rs. 5,00,001 to Rs, 10,00,000	20%
Above Rs. 10,00,000	30%

New Tax Regime

Income Slab	Income Tax Rate
Up to Rs. 3,00,000	Nil
Rs. 3,00,001 to Rs. 6,00,000	5% (Tax Rebate u/s 87A)
Rs. 6,00,001 to Rs, 9,00,000	10% (Tax Rebate u/s 87A upto Rs. 7,00,000)
Rs. 9,00,001 to Rs. 12,00,000	15%
Rs. 12,00,000 to Rs. 15,00,000	20%
Above Rs. 15,00,000	30%

Choosing the Right Tax Regime

Here’s a list of suggestions that can help you those the right tax regime:

• Consider Deductions: Opt for the old regime if you have significant deductions and exemptions as it can help you maximise tax benefits.
• Simplicity Preference: Choose the new regime if you prefer a straightforward approach and have a simple financial situation.
• Flexibility Requirement: If you value flexibility in customising your tax strategy based on financial decisions, the old regime might be more suitable for you.
• Personal Circumstances: Lastly, evaluate both regimes on the basis of your financial circumstances and consult a tax advisor for guidance.

Top 10 Income Sources that are Taxable in India

Understanding your source of income and its tax implications is a crucial step in 'How to save tax'. So, let's have a glance at each income type.

1. Salary: The government imposes taxes on your salary, and the tax amount depends on the level of income. Notably, the income on which tax is calculated not just include your base pay but also bonuses, allowances, and perks.
   
   
2. Pension Income: The money you receive on a regular basis following your retirement from employment is also subject to taxation.
   
   
3. Business Income: If you are a business owner then the money you make from it is identified as business income. This type of income is also subject to taxes, the amount of which depends on the existing rules and regulations.
   
   
4. Income from Freelancing: This category of income includes earnings from self-employment activities such as freelancing or consulting.
   
   
5. Rental Income: Whether you are earning rent from a residential property or a commercial space, this income is taxable. So, it is essential to report your rental income and adhere to tax regulations.
   
   
6. Foreign Income: Regardless of your status as a resident, income derived from sources outside of India is referred to as foreign income. And, such income is taxable in India.
   
   
7. Real Estate Gains: When you sell a property for an amount that is more than what you paid for it, you make a real estate gain. Understanding the tax implications on such real estate transactions is vital in order to avoid last-minute surprises.
   
   
8. Income from Investments: This is the money you get from investing in various products and services, such as fixed deposits and mutual funds.
   
   
9. Capital Gains: If you have invested in stocks and you make money by selling stocks or other securities, it's considered capital gains. The tax on capital gains depends on how long you have held the investment i.e. short-term or long-term.
   
   
10. Income from Other Sources: This category covers all of your income that doesn't fall into any of the above-listed categories.

Why Tax Planning is Important?

The reasons that make tax planning important are listed below:

• Reduce Tax Payments: You can easily find ways to reduce the amount of taxes you owe by being well-prepared and knowing the relevant legal regulations. As a result of this, you will then have extra money in your pocket. Example: Save some money each year in a child plan for your daughter to make sure she has enough money saved for her education or marriage.
  
  
• Use Deductions Wisely: By utilising the tax deductions under Sections like 80D, 10(10D), and more, you can lower the amount of your income that is taxable. In the long run, this can result in considerable savings. Example: Keep your family secure by getting a life insurance or health insurance policy. This can help you save taxes up to Rs.1.5 lakhs and Rs.75,000 respectively.
  
  
• Grow Your Wealth: Growing your wealth with tax planning is a strategy where you not only save money but also choose ways that come with tax benefits. Example: You can invest in a ULIP policy through us and grow your wealth through market-linked returns.
  
  
• Secure Your Family: Purchasing a health or life insurance policy to ensure your family's financial security is not only an ideal decision for their well-being but also offers numerous tax advantages. Example: Gain tax benefits of up to Rs. 1.5 lakhs with Life insurance under Section 80C and an additional deduction up to Rs.75,000 with health insurance under Section 80D.

How to Save Tax in FY 2023-24?

Find ways to save on taxes in the financial year 2023-24 by checking out smart tax saving investments and figuring out which deductions apply to you.

a) Different Sections of the Income Tax Act Providing Options for Tax Saving

Here’s the list of Sections providing tax benefits under the Income Tax Act, 1961:

• Section 80D: Deductions for Medical & Health Insurance

Section 80D encourages individuals to acquire health insurance policies by providing deductions for premiums paid. This section aims at promoting financial protection against medical expenses.

• Section 10 (10D): Exemption for Income from Life Insurance Policies

Section 10 (10D) provides tax exemption on the maturity income received from life insurance policies. It aims to ease the tax burden on individuals benefiting from life insurance.

• Section 80TTA: Claiming Deduction on Interest

This section allows individuals to claim deductions on interest income from savings accounts. It not only encourages savings but also provides tax relief on interest earned.

• Section 80GG: Claiming Deduction for Rent Paid

Section 80GG offers a tax deduction for individuals who are not receiving House Rent Allowance (HRA). This makes renting homes more financially feasible.

• Section 80E: Income Tax Deduction for Interest on Education Loan

This section of the Income Tax Act, 1961, supports education by providing deductions on the interest paid on education loans. This eases the financial burden on individuals who are pursuing their higher studies.

• Section 80EE: Deduction for Interest on Home Loan

Section 80EE facilitates home ownership by granting deductions on home loan interest for first-time buyers. This way, residential real estate investments are promoted.

• Section 80EEA: Deduction on Home Loan Interest

Section 80EEA is intended to encourage affordable housing by offering tax deductions for interest paid on home loans. It is directly aimed at fostering participation in the housing sector.

• Section 80DD: Tax Deductions for Disabled Persons

Section 80DD aims to help individuals taking care of dependents with disabilities. It offers deductions for medical expenses and supports the financial challenges such individuals face.

• Section 80U: Deduction for a Person with Disability

This section of the Income Tax Act provides tax deductions for disabled individuals, recognising the additional financial burden they might bear due to their condition.

• Section 80GGB - Tax Deduction of Political Contribution

Section 80GGB encourages participation in the political process by allowing deductions for contributions made to political parties. This indirectly promotes civic engagement.

• Section 80G: Claim Tax Benefits on Donations

Section 80G fosters social responsibility by allowing deductions on donations made to charitable organisations.

• Section 80GGC: Deduction on Donations to Political Party

This section provides deductions for contributions made to political parties with the motive of encouraging citizen involvement in the political system.

• Section 80RRB: Deductions on Income from Patent Royalty

This section promotes innovation and patent creation by offering deductions on income received from patent royalties.

• Section 80TTB: Tax Exemption for Senior Citizens

Section 80TTB recognises the financial challenges that senior citizens face during retirement. It provides tax exemptions for senior citizens on interest income from specified deposits.

• Section 24: Deduction on Interest Payment on Housing Loan

Section 24 of the Income Tax Act encourages home ownership by offering deductions on interest payments made towards housing loans.

To know more about these sections, refer to the table below:

Section	Purpose	Eligibility Criteria	Deduction Limit
Section 80D	Deduction for premiums paid on health insurance policies	Individual or HUF	Up to Rs. 25,000 for individuals, Rs. 50,000 for individual + family, Rs. 75,000 for individual + senior citizen
Section 10(10D)	Exemption for income from life insurance policies	Any taxpayer	The entire amount received on maturity is tax-free, subject to conditions
Section 80TTA	Deduction on the interest income from savings account	Individual or HUF	Up to Rs. 10,000
Section 80GG	Deduction for rent paid when HRA is not received	Individual or HUF not receiving HRA	The least of - 25% of total income, actual rent paid minus 10% of total income, or Rs. 5,000 per month
Section 80E	Deduction for interest on education loan	Individual for self, spouse, or children	Interest paid for a maximum of 8 years or until the interest is paid, whichever is earlier
Section 80EE	Deduction on home loan interest	First-time home buyer	Up to Rs. 50,000
Section 80EEA	Deduction on home loan interest	First-time home buyer	Up to Rs. 1,50,000
Section 80DD	Deduction for medical expenses on a dependent with a disability	Individual or HUF with a disabled dependent	Up to Rs. 75,000 or Rs. 1,25,000, depending upon the extent of disability
Section 80U	Deduction for a person with a disability	Disabled Self	Up to Rs. 75,000 or Rs. 1,25,000, depending upon the extent of disability
Section 80GGB	Deduction for contributions made to political parties by companies	Companies	100% of the contribution made, except donations given in cash
Section 80G	Deduction for donations made to charitable organisations	Individual or HUF	Varies based on the type of donation and the recipient organisation
Section 80GGC	Deduction for contributions made to political parties by individuals	Individuals	100% of the contribution made
Section 80RRB	Deduction for income by way of royalty or copyrights in respect of patents	Any taxpayer	Up to Rs. 3,00,000
Section 80TTB	Deduction for senior citizens on interest income from specified deposits	Senior citizens	Up to Rs. 50,000 from interest income
Section 24	Deduction on interest payment on housing loan	Individual or HUF for a self-occupied property	Up to Rs. 2,00,000

b) Top 11 Tax Saving Instruments in India

Saving on taxes is always a smart move, and in India, several instruments can help you do just that. Mentioned below are some of the top tax saving options:

• Health Insurance: When you get health insurance, you're making sure that the insurance company will help you pay for the unpredicted medical expenses.
  
  
• Term Insurance: Term insurance offers financial security to your loved ones in case of your unfortunate demise.
  
  
• Unit Linked Insurance Plan (ULIP): ULIP is a dual-benefit plan offering life coverage and investment opportunities. To put it simply, ULIP combines insurance and investment while reducing your tax liability.
  
  
• Sukanya Samridhi Yojana (SSY): SSY is a government-backed scheme for a girl child's education and marriage. This investment scheme secures a bright future for your daughter.
  
  
• Public Provident Fund (PPF): PPF is like a long-term piggy bank where you put your money and over time it grows. It's a good option to pool some savings.
  
  
• Equity Linked Savings Scheme (ELSS): ELSS funds allocate a significant portion of the funds to equity or equity-related instruments.
  
  
• Guaranteed Insurance and Investment Plans: These plans provide life insurance, maturity benefits, and a guaranteed income. Moreover, both premiums and maturity benefits under these plans are tax-free. Some of these plans are LIC New Jeevan Anand, Max Life Guaranteed Monthly Plan, etc.
  
  
• National Pension Scheme (NPS): NPS is one of those tax saving schemes that acts like your personal pension plan. In NPS, you put money while you're working, and get a regular income in turn when you're older.
  
  
• Senior Citizens Saving Scheme: It is a scheme for senior citizens that offers regular interest income and tax benefits, making life a bit more comfortable during golden years.
  
  
• Post Office Savings Account: A traditional savings account where the interest that you earn gets a tax discount, making your savings more rewarding.
  
  
• National Saving Certificate: It is a fixed-income investment scheme or tax saving scheme that offers a tax break.

Let’s have a quick look at these instruments and their related sections, deductions, and lock-in periods.

Instrument	Exemption Limit	Deduction Section	Lock-in Period
Health Insurance	Rs. 25,000, Rs. 50,000, or Rs. 75,000	80D	-
Term Insurance	Up to Rs. 1.5 lakhs	80C	-
Unit Linked Insurance Plan (ULIP)	Up to Rs. 1.5 lakhs	80C and 10(10)D	5 years
Sukanya Samridhi Yojana	Up to Rs. 1.5 lakhs	80C	Till maturity (21 Years)
Public Provident Fund (PPF)	Up to Rs. 1.5 lakhs	80C	15 years
Equity Linked Savings Scheme (ELSS)	Up to Rs. 1.5 lakhs	80C	3 years
Guaranteed Insurance and Investment Plans	Up to Rs. 1.5 lakhs	80C and 10(10)D	Depends upon the policy chosen
National Pension Scheme (NPS)	Up to Rs. 2 lakhs	80CCD	Till retirement
Senior Citizens Saving Scheme	Up to Rs. 1.5 lakhs	80C	5 years
Post Office Savings Account	Rs. 10,000 (interest)	80TTA	-
National Saving Certificate	Up to Rs. 1.5 lakhs	80C	5 years

c) Insurance Matters

Many of you might not know but getting yourself covered with insurance is also a crucial step towards financial security. Not only does it come with offering you peace of mind but also provides the added benefit of reducing your tax burden.

When choosing insurance as your option to save taxes, ensure you don't opt for a policy that is solely directed toward offering tax benefits. Instead, take the time to compare policies, read the policy document, and make an informed decision.

Important Tax-Saving Tips to Know About

Are you planning to start your ‘How to Save Tax” journey? If yes, then wait and go through the pointers below because starting this journey can surely be a game changer but it’s always advised to be well-prepared before.

1. Know Your Tax Profile

The foremost crucial thing is to familiarise yourself with your tax bracket and exemptions. This knowledge will allow you to choose the most appropriate tax-saving instruments and make informed financial decisions.

2. Explore Investment Options

To succeed on your way to saving taxes, make sure you identify and explore the list of tax saving investments available. Also, keep in mind that each tax-saving avenue comes with its own set of risks and advantages, so always choose one or more based on your risk tolerance, investment horizon, and financial goals.

3. Keep Track of Important Deadlines

It is highly recommended to stay organised and keep track of all the crucial deadlines related to taxation. You should always be filing your returns on time in order to avoid penalties. And, missing on deadlines can result in unnecessary financial stress and potential legal consequences.

4. Review Tax Laws Regularly

Please note that tax laws are subject to change. Therefore, you must always stay informed about updates and amendments in the Income Tax Act, 1961 to make sure your strategies align with the latest rules and regulations.

Steps to File an ITR Online

Here’s how you can seamlessly file an ITR online.

Step 1: Visit the official Income Tax e-filing website, enter your PAN number, and hit the "Continue" button. Later, tick the security message, enter the password, and proceed further.

Step 2: Next, go to the “e-File” tab, then proceed to “Income Tax Returns,” and finally, click on “File Income Tax Return."

Step 3: On the next page, choose the Assessment Year and choose “Online” under Mode of Filing.

Step 4: From the available options, choose your status type and click on “Continue."

Step 5: On the next window, choose the right ITR form from the list of 7 ITR Forms.

Step 6: In the next step, you'll be asked why you're filing your returns. Choose the option that best fits your situation.

Step 7: Share your bank details and if you've shared them before, make sure you check everything carefully, confirm your return summary, and validate the details.

Step 8: The last step is to e-verify your ITR. You can do this by choosing any of the verification methods, such as Aadhaar OTP, Net Banking, etc.

Important Considerations When Filling an ITR

The significant considerations when filling an ITR are as follows:

1. Gather Relevant Documents: Make sure you start by gathering all the required documents like Form 16, bank statements, and investment records.
   
   
2. Verify Personal Details: You must make sure that your name, address, PAN, and Aadhaar number are correct. Note that all errors should be fixed before filing.
   
   
3. Choose the Right ITR Form: Select the correct ITR form on the basis of your source of income in order to avoid complications and processing delays.
   
   
4. Verify Income: Double-check that your income, interest, and other earnings are reported accurately.
   
   
5. Claim Deductions and Exemptions: Identify and claim all eligible deductions and exemptions allowed under tax laws to maximise your tax benefits.
   
   
6. Provide Accurate Bank Details: Give precise and active bank details to ensure smooth tax refunds.
   
   
7. File ITR On Time: File your return within the due date to avoid penalties. It moreover allows carrying forward losses and filing a revised return, if needed.
   
   
8. E-verify Your Return: Complete the e-verification of your return within 30 days of filing.

9 Common Tax-Saving Mistakes to Avoid

When it comes to saving on taxes, avoiding common mistakes can make a significant difference in your financial well-being. Let's have a glance at some common mistakes that you must avoid to make the most of your tax-saving efforts:

• Overlooking Deductions: Not claiming all the deductions you're actually eligible for.
  
  
• Missing Deadlines: Failing to file ITR on time or not meeting e-verification deadlines.
  
  
• Neglecting Documentation: Not keeping track of expenses and investment proofs.
  
  
• Choosing Wrong Investment Avenues: Investing without understanding tax implications of each investment instrument.
  
  
• Not Updating Personal Details: Not updating personal details relating to PAN, Aadhaar, or address is something that you must avoid.
  
  
• Ignoring Spousal Benefits: Spousal benefits or joint tax-saving opportunities should never be ignored.
  
  
• Misunderstanding Tax Brackets: Incorrectly estimating taxable income or tax brackets is something that you should avoid.
  
  
• Skipping Insurance Benefits: Overlooking tax exemptions on life and health insurance premiums must be avoided.
  
  
• Avoiding Professional Guidance: Not seeking expert advice for personalised tax strategies.

Conclusion

In the journey of "How to Save Tax", remember that your financial decisions today will shape your future. If we talk about the number of tax-saving options available, there are plenty. But out of all the options available, the insurance policy will definitely prove to be a valuable tool because it's not just a smart way to reduce your tax burden but also offers protection as well as opportunities for wealth creation.

So, what are you waiting for? Contact us today, and let us discuss securing your financial future. With InsuranceDekho, your peace of mind is just a conversation away.