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Income Tax tricks: How to plan smartly to have more cash in hand from salary every month

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income tax tips and ticks 2021Earnings tax saving ideas and ticks 2021. Representational picture/Pexels.

Earnings Tax planning: Covid-19 pandemic has hit the salaried class arduous. Lockdown led to wage cuts and even job losses for lakhs of workers final yr. Even the casual sector staff have been badly hit by the pandemic and subsequent lockdowns. Now we have all the time believed within the significance of getting more cash in hand to face any disaster. Nonetheless, the pandemic has helped reinforce this concept, in all probability like by no means earlier than for the brand new technology. Even specialists consider that salaried people ought to study from the pandemic and begin investing to create a contingency fund.

Contingency funding must be carried out in liquid funds in order that it may be redeemed instantly when the necessity arises. The best quantity of contingency fund must be six instances of your month-to-month wage/revenue. Within the new monetary yr, lockdowns in a number of states have as soon as once more compelled folks to look out for methods to extend the month-to-month circulation of in-hand money. Correct tax planning will help in that route.

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Archit Gupta, Founder and CEO, ClearTax, means that people ought to handle their revenue and investments to save lots of on taxes. This may depart them with more cash in-hand

“The brand new monetary yr is underway, and you have to handle your revenue and investments to save lots of on taxes. Employers deduct relevant taxes upfront from the wage paid to their workers. You should consider your complete anticipated revenue for the monetary yr and put money into appropriate tax-saving investments if you happen to anticipate your revenue to exceed the taxable restrict,” Gupta instructed FE On-line.

Gupta additional mentioned that you have to select investments that qualify for the Part 80C tax deduction as much as Rs 1.5 lakh every year, relying in your funding goals and threat tolerance. For instance, he mentioned {that a} conservative investor could put money into PPF or NSC, whereas an aggressive investor could go for ELSS, which invests primarily in shares.

“Salaried workers dwelling in rented lodging can declare home hire allowance or HRA. You get a tax deduction as much as a prescribed quantity primarily based on sure situations. It can save you taxes on medical insurance premiums beneath Part 80D, and also you qualify for a tax deduction on dwelling mortgage curiosity as much as Rs 2 lakh every year,” Gupta mentioned.

Salaried people should submit tax-saving proof to their HR on time in order that TDS shouldn’t be deducted from their wage unnecessarily. The accounts division computes the taxes solely after receiving documentary tax-saving proof.

“Guaranteeing you’ve carried out requisite tax planning and knowledgeable your employer will make sure that TDS deducted in your wage is as per your tax-saving targets, this can depart extra cash in your hand,” mentioned Gupta.

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Sujit Bangar, Founder Taxbuddy.com, mentioned the perfect lesson to be learnt from the yr 2020 is about disciplined investments. Lack of economic self-discipline brought about helplessness in 2020. “When future is unsure, solely your good previous deeds of financial savings and investments would rescue you.”

It’s mentioned that in disaster ‘money is the king’. Subsequently, Bangar mentioned. the key goal of tax planning in these instances must be to make sure extra in hand wage so it could be doable to preserve money.

Normally, we begin fascinated by tax planning on the finish of the monetary yr. For instance, within the month of February. At the moment we’ve solely two months’ revenue in our hand for using tax-saving investments. Additionally, many year-end bills are additionally piling up at the moment. In consequence, we find yourself doing much less optimised tax planning.

Subsequently, to extend refund, you must plan your taxes to maximise tax saving with minimal money outgo.

Bangar urged that one ought to comply with two ideas on this interval of lockdown:

  • Plan your taxes in Might/June and utilise runway of 11–12 months for tax saving investments to have much less pinch on money circulation.
  • Work out how a lot tax has already been saved by unknowingly carried out issues like tuition charges for teenagers and many others.

“Planning taxes means sure money outgo for the aim of investing. As a result of COVID disaster, our money necessities have elevated and we might have extra cash at disposal. From the present yr, the taxpayer has the choice of a brand new tax regime the place with none tax-saving investments, the person can take pleasure in the advantages of decrease tax charges. Lastly, covid instances have proven us the significance of getting medical insurance for self and household. Earnings tax act offers tax deduction u/s 80D for medical insurance premiums paid for self and relations. Subsequently, go for medical insurance ASAP if not availed to this point,” Bangar instructed FE On-line.

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