Tax Saving Tips: Follow these methods to pay less tax in the new financial year, know the suggestions of experts

How To Pay Less Tax in 2023-24: The season of increment is about to begin. While a higher salary hike is always good news, it also increases the tax. In some cases, the salary increase can take the person to a higher tax slab. In such a situation, this is the time to make use of the available tax deductions and exemptions.

New Delhi: The start of a new financial year is a good time to re-evaluate your finances as well as explore possible changes that can help you save tax and grow your wealth. The season of increment is about to begin. While a higher salary hike is always good news, it also increases the tax. In some cases, the salary increase can take the person to a higher tax slab. For example, if a person earning Rs 10 lakh gets an increase of 20 percent, his tax slab changes from 20 percent to 30 percent. Above the 20 percent slab limit of Rs 10 lakh, an additional tax of 10 percent will be levied on Rs 2 lakh. If the annual income of a person increases by 10% to Rs 48 lakh, then the surcharge on his income will increase by 10%.

Tax optimization requires restructuring your income and investments so that all available tax deductions and exemptions are utilized to the maximum allowable limit. In such a situation, the measures given below can help the salaried people-

Save tax by restructuring your salary

Many companies allow their employees to change the CTC at the beginning of the financial year. Restructure the salary to include more tax benefits, if your company gives you this option. These include reimbursement of telephone and internet bills, fuel and travel expenses, meal coupons, and newspaper bills. The car leasing option has lost its attractiveness post GST implementation, but driver salary, petrol, insurance, and maintenance are still beneficial.

Get tax exemption on fares with Leave Travel Assistance

In the last two years, the Leave Travel Assistance (LTA) could not be utilized due to travel restrictions due to Covid. But now that travel restrictions have been lifted, it makes sense to choose this big tax saver in your CTC. The travel fare of your family is eligible for tax exemption as part of CTC. Note that LTA should be made a part of CTC at the beginning of the year. You cannot opt for it during or after the year or claim it while filing ITR.

Choose the option to contribute to NPS

This benefit given by many companies to their employees is like an unpolished diamond. Under section 80CCD(2), up to 10% of the basic salary kept in NPS is tax-free. Yet barely 10 percent of the employees who have been offered this benefit have opted for it. Even though it can reduce the tax considerably. NPS is better than mutual funds in terms of cost and also better than other retirement savings options (such as provident funds, PPF, and insurance plans) in terms of returns. This is also because it allows partial withdrawal and a 60% tax-free corpus can be withdrawn on maturity. The remaining 40 percent will be annuitised but will be tax-free. It is highly beneficial for employees who have sufficient cash. This is very useful for high-income people.

NPS can help in saving more tax if the taxpayer himself invests in this scheme. There is an additional deduction of Rs 50,000 for contribution to NPS under section 80CCD(1B). This is in addition to the deduction of Rs 1.5 lakh allowed under section 80C.

Start Tax Saving Investment

There is a saying that a good start is half done. For this reason, do not wait till the last few months of the financial year for your tax-saving investments. If you are planning to invest in the ELSS fund, then start SIP in April itself. Starting in April, you will be able to reduce the risk over time instead of putting in a lump sum at the end of the year. Even if you intend to opt for a risk-free fixed-income option like PPF, invest as early as possible to get the benefit of compound interest.

Submit Form 15G or 15H

If your basic income does not exceed the exemption limit, then submit Form 15G or 15H to avoid a TDS deduction on interest income. But, make sure that you are eligible to submit these forms or not. Wrong declarations can lead to tax evasion and invite harsher penalties from the tax department.

(Author inputs - Sudhir Kaushik, CEO of tax filing portal Taxspanner.com)