How to reduce your income tax burden for the F.Y.2021-22| everyone wants to reduce income tax liability but most of them do not know how to reduce income tax liability legally. Some people know partial. As a result, they pay more taxes than they can save. In this article, I will try to help you reduce the burden of income tax.
But before we move on to our main discussion I would like to highlight some of the recent changes in the Income Tax Act that you should know for proper tax planning.
Recent changes in income tax effective from 1.4.2021
The Finance Act 2020 and 2021 have seen major changes affecting most income taxpayers. Until you know these changes, you will face many problems. In this article, I have tried to explain them and give you advice on how to deal with them.
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1. Tax on interest in PF: As per the budget of 2021, the interest income of the fund provided is fully taxable, if it is Rs 2,000 more than the interest. 2.5 Lakhs
2. Punishment for linking Aadhaar and PAN: The last date for linking a PAN card with the Aadhaar card is 31.3.21. If you fail to do so, you will be fined Rs 10,000 U/s 272B of the Income Tax Act.
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What is the process to reduce tax liability?
The most affected taxpayers are the salaried people. They do not have the opportunity to reduce their tax liability, which are detailed below:
A) Savings under sections 80C and 80CC (maximum investment limit is Rs. 1.50 lakhs)
# Compulsory contribution to the Provident Fund
# Voluntary contribution to the Provident Fund (VPF)
# Contribution to Public Provident Fund Account (CPF)
# Life insurance premium
# Equity-linked savings scheme,
# Payment of principal amount for a home loan
# Certificate of National Conservation (NSC)
# Unit Combined Insurance Plan (ULIP)
# Tax saving FD for five years
B) Savings under section 80 CCD (1)
Employee Contribution to NPS under 80 CCD (1)
1.5 to 1.5 Lakh
C) Savings under section 80CCD (1B)
Rs.50000 towards contribution against extra deducted NPS. Contributions to the Atal Pension Scheme are also eligible for exemption.
D) Savings under section 80CCD (2)
Under section 80CCD (2), the contribution of employers towards NPS is allowed under this section to be deducted up to 10% of the additional incremental allowance of private salary.
E) Savings under 80D
The health insurance premium under section 80D is Rs. 25000 for self, wife and dependent children. The extra rupee maybe available for a discount of Rs 30,000 if the premium is paid to parents below 60 years of age.
F) Deduction U/s 24 (b)
Interest in house building can be deducted up to Rs. 2,000 as income from house building. 2 lakh rupees.
G) Exemption for interest earned from bank accounts and deposits under section 80 TTB
Senior citizens will be able to give a discount as per the TBB section. 50000 for interest earned against the bank deposit.
H) Exemption under Section 80G for grants made to charities
Anyone can save tax by donating to a charitable organization eligible under section 80. However, before granting a grant, one must ensure that the company is registered with the Income Tax Department and is eligible for an 80G exemption.
i) Section 80DD - Disable reliable discount. (Wife / child / parents)
An exemption may be claimed in this section if any spouse/child/parent is partially or completely disabled.
j) Exemption for Section 80U-disabled taxpayers
If a taxpayer himself is partially or completely disabled, a waiver can be claimed in this section.
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