How to Save Income Tax in 2022? | Best Tax Saving Guide

TL;DR

You can legally save income tax in India by claiming eligible salary exemptions and reducing taxable income through deductions such as ELSS, PPF, and National Savings Certificates under Section 80C. The guide covers a maximum Section 80C deduction of ₹1.5 lakh, along with tax considerations for salaried employees and freelancers. Read on to compare the available exemptions, investments, and filing considerations.

Transcript

hi everyone i'm shan sharma and in this video i want to talk about taxes or how can you actually save taxes legally right we'll be talking about exemptions we'll be talking about deductions and we will not be talking about evasion tax evasion is illegal do not do that but we'll be talking about how can you legally save taxes we'll first look at a s... Read More

Key Insights

• 🗺️ Leveraging allowances like housing and travel allowances can significantly reduce taxable income.
• 💐 Investment in ELSS, PPF, and NSC can further lower taxable income under Section 80C.
• 🚕 Freelancers can benefit from presumptive taxation schemes like 44AD and 44ADA for simplified tax calculations.
• 🚕 Understanding tax implications for freelancers earning over 20 lakhs per year is crucial.
• 🤝 Leveraging GST registration and dealing with TDS deductions are essential considerations for freelancers.
• 💁 Differentiating between tax filing forms like ITR-1 for employees and ITR-4 for freelancers is important.
• 🤝 Regularly monitoring TDS payments through form 26AS is crucial for freelancers dealing with Indian clients.

Questions & Answers

Q: How can you legally save income tax in India?

You can reduce taxable income by claiming eligible exemptions for housing, travel, tuition fees, and workplace reimbursements. You can then use deductions from investments such as ELSS, PPF, tax-saving fixed deposits, and National Savings Certificates, subject to the applicable Section 80C limit.

Q: Which salary allowances can employees claim as tax exemptions?

The guide identifies house rent allowance, travel allowance, and eligible reimbursements for items such as mobile, internet, food, and coupons. Tuition fees for children may also be exempted from salary when calculating taxable income.

Q: What is the difference between a tax exemption and a tax deduction?

An exemption removes eligible amounts, such as certain allowances and reimbursements, from salary before taxable income is calculated. A deduction further reduces taxable income through eligible investments and tax-saving options.

Q: How does ELSS help reduce taxable income?

ELSS stands for Equity Linked Savings Scheme and consists of equity mutual funds. The amount invested can be claimed as a deduction from taxable income within the Section 80C limit.

Q: What is the maximum deduction available under Section 80C?

The guide states that the maximum Section 80C deduction is ₹1.5 lakh per year. This limit can be reached through ELSS alone or through a combination of eligible options such as ELSS, PPF, and National Savings Certificates.

Q: What does the guide say about National Savings Certificates?

A National Savings Certificate can be obtained through a post office and has a five-year lock-in period. The guide cites a 6.8% interest rate while noting that the rate can be revised every few quarters.

Q: What are the tax-saving features of a PPF account?

The guide says a Public Provident Fund account has a 15-year lock-in period that can be extended in five-year increments. It allows investment of about ₹1.5 lakh each year, cites a 7.1% interest rate, and states that its returns are tax-exempt.

Q: What tax considerations does the guide identify for freelancers in India?

The guide highlights presumptive taxation under Sections 44AD and 44ADA as a way to simplify tax calculations for freelancers. It also identifies GST registration, TDS deductions, Form 26AS monitoring, and ITR-4 filing as relevant considerations, particularly when annual earnings exceed ₹20 lakh.

Summary & Key Takeaways

• Understanding exemptions: Utilize allowances like housing and travel allowance, along with tuition fee exemptions to lower taxable income.

• Exploring deductions: Invest in ELSS, PPF, NSC, and other schemes to reduce taxable income further.

• Freelancer tax considerations: Utilize presumptive taxation schemes like 44AD and 44ADA to simplify tax calculations.