5 income tax saving tips in 2022
When it comes to tax-saving a few things are known to everyone. 80C investments such as PPF, ELSS, HRA, or Home Loan Interest But there are a few tax-saving tips That not a lot of people know. Today we will talk about 5 tax-saving tips which will help not just employees but also business owners and freelancers save tax in a legal way.
Number 5:income tax saving tips
Number five. Section 80GG People like me, who haven’t bought a house yet their highest living expense is rent. It is good that salaried employees get HRA benefits. But if you are a salaried employee without HRA or a business owner or freelancer who lives in rented houses and doesn’t have HRA.
How can you save tax with this?
There is a section for them in the Income Tax Act called 80GG. Self-employed individuals or those who don’t get HRA if they live in rented accommodations then according to section 80GG can claim income tax exemptions.
There are three conditions and the least amount among them you can claim that exemption.
- Condition one. Annual Rent paid minus 10% of the total income.
- Condition two.₹5.000 per month.
- Condition three. 25% of your total income.
The lowest amount out of all three will be your exemption.
For example, Mr . Tiwari’s annual income is ₹5 lakhs ((before allowing deduction under section 80GG) and he pays ₹10,000 as rent per month. So the first condition is rent paid minus 10% of total income. The rent of ₹10,000 multiplied by 12 is ₹1,20,000 yearly. he has to subtract 10% of the total income which is 10% of ₹5 lakhs. ₹50,000 The amount will be ₹70,000.
The second condition is ₹5,000 per month which is ₹60,000 annually.
And the third condition is 25% of Total Income. 25% of ₹5 lakhs is ₹1,25,000.
The least among the three is ₹60,000.
So, according to 80GG, he will get an exemption of ₹60.000.
The following conditions have to be satisfied for claiming deduction under section 80GG
- The assessee should not be receiving any house rent allowance exempt under section 10(13A).
- The assessee or his spouse or his minor child or a HUF of which he is a member should not own any accommodation at the place where he ordinarily resides or perform duties of his office or employment or carries on his business or profession; or
- If the assessee owns any accommodation at any place other than that referred to above, such accommodation should not be in the occupation of the assessee, and its annual value is not required to be determined under section 23(2)(a) or section 23(4)(a).
- The expenditure incurred by him on rent of any furnished or unfurnished accommodation should exceed 10% of his total income arrived at after all deductions under Chapter VI-A except section 80GG.
- The assessee should file a declaration in the prescribed form 10BA, confirming the details of rent paid and fulfillment of other conditions, with the return of income.
Number 2:income tax saving tips in 2022
Number four, section 80D. Most of us know that from our medical insurance, the premium can be claimed as a deduction under 80D.but apart from medical insurance, there is one more component that most people don’t know about. Let’s understand section 80D. If you or your family, that is, your wife and child take medical insurance and, if you are below 60 years of age then you can claim an annual deduction of ₹25,000. If you pay your parents’ premium as well then ₹25,000 more are added.
Deduction in respect of insurance premium paid for the family: A deduction to the extent of ` 25,000 is allowed in respect of the following payments –
- premium paid to effect or to keep in force an insurance on the health of self, spouse, and dependent children or
- any contribution made to the Central Government Health Scheme or
- such other health scheme as may be notified by the Central Government. Contributory Health Service Scheme of the Department of Space has been notified by the Central Government
A further deduction up to RS 25,000 is allowable to effect or to keep in force insurance on the health of the parents of the assessee. Quantum of deduction in case of senior citizen: An increased deduction of RS 50,000 (instead of RS 25,000) shall be allowed in case any of the persons mentioned above is a senior citizen i.e., an individual resident in India of the age of 60 years or more at any time during the relevant previous year
Section 80D provides that deduction to the extent of RS 5,000 shall be allowed in respect of payment made on account of preventive health check-ups of self, spouse, dependent children, or parents during the previous year. However, the said deduction of RS 5,000 is within the overall limit of RS 25,000 or RS 50,000.
As a welfare measure towards senior citizens i.e., a person of the age of 60 years or more and resident in India, who are unable to get health insurance coverage, a deduction of up to RS 50,000 would be allowed in respect of any payment made on account of medical expenditure in respect of such person(s), if no payment has been made to keep in force an insurance on the health of such person(s).
For claiming deduction under section 80D, the payment can be made:
- by any mode, including cash, in respect of any sum paid on account of preventive health check-up
- by any mode other than cash, in all other cases
for example :
Mr. TIWARI, aged 40 years, paid a medical insurance premium of RS 20,000 during the P.Y. 2021-22 to insure his health as well as the health of his spouse. He also paid a medical insurance premium of RS 47,000 during the year to insure his father’s health, aged 63 years, who is not dependent on him. He has incurred RS 3,000 in cash on preventive health check-ups for himself and his spouse and RS 5,000 by cheque on preventive health check-ups for his father. Compute the deduction allowable under section 80D for the A.Y. 2022-23.
| Particulars | Actual Payment | Maximum deduction allowable |
| Premium paid and medical expenditure incurred for self and spouse | ||
|
|
|
|
TOTAL |
2500 | 2500 |
| Premium paid or medical expenditure incurred for father, who is a senior citizen: | ||
|
|
|
| TOTAL | 52,000 | 49,000 |
| so Total deduction under section 80D (RS 25,000 + RS 49,000)= 74000 |
Note: In this case, the total deduction allowed on account of expenditure on preventive health check-ups of self, spouse, and father is restricted to RS 5000
Number 3:income tax saving tips in F.Y.2022-2023
Third. Section 80CCD (1B) You must know that by adding section tax-saving and these two sections you can claim a total deduction of ₹1.5 lakhs that you get by investing in PPF, ELSS, etc. But many people don’t know that you can get an additional ₹50,000 deduction through section 80CCD (1B) which you can get by investing in NPS. If over the limit of ₹1.5 lakhs if you invest ₹50,000 in NPS then you can claim that as a deduction as well. But keep in mind that only tier 1 accounts, the ones with lock-in periods up to age 60. If you are investing in it, you will get this deduction. If you invest in the tier 2 account under NPS then it is not eligible for deduction.
Number 4:Tax Harvesting.
Number two. Tax Harvesting. Before 2018, there was no tax on the long-term capital gain. When the govt introduced this tax they gave a small benefit. Capital gain up to ₹1 lakh is tax free. But most of us are not able to use this ₹1 lakh limit, because in India, tax is on Realised Profit. Your portfolio could be highly profit-making and you fulfill the long-term capital gain condition which is for 12 months. But you haven’t sold your shares or mutual funds yet, and the profit has not been realised. So your ₹1 lakh limit for the year is wasted. The method for using that limit is Tax Harvesting.
Let’s take an example.
MR TIWARI is holding all his stocks and after. 3 years, he has an LTCG of ₹3 lakhs. After subtracting ₹1 lakh, he will have to pay ₹20,000 as 10% tax on the remaining ₹2 lakhs. Whereas I sold my profit shares every year and immediately bought them from the market again. This way, every year, my LTCG was realized, and by the third year, I made a ₹3 lakh profit but my tax was 0.
Number 5:income tax saving tips carry forward losses
Number one, carry forward losses. I once lost ₹1 lakh in the stock market. I thought I already had a loss and earned nothing. So it doesn’t make sense to file a return I won’t do it. Since I lost money, I don’t have to pay any taxes. So let’s not file a return. But by doing this, I made a mistake. You will ask why. Because there are two concepts of the Income Tax Act that you must know. Set off and Carry forward losses.Set Off means that during any year if you had a business or capital loss then against the business profit or capital gain for that year you can do a set-off, which means they will cancel out. There are a few conditions in this. Such as, a long-term capital loss can be set off only against long-term capital gains. Short-term capital loss can be set off with long-term and short-term gains. Business losses can only be against business gains. But in my case, I didn’t make any profits that year and lost ₹1 lakh. What do I set off my loss against? The Income Tax gives you a relaxation where you can carry forward this loss for eight years.
For example, the ₹1 lakh loss this year will carry forward to next year. If I have a ₹50,000 profit next year then this ₹50,000 will be canceled out. Another ₹50,000 loss will remain and it will carry forward to next year. If I have a profit of ₹1 lakh next year then after setting off the ₹50,000 loss, I have to pay tax only on the remaining ₹50,000 gain. But the important condition here that you must know is that filing an income tax return is necessary for this. If you don’t file a return then you can’t carry forward your losses.
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