Income tax allows certain deductions from loans, insurance, PPF fixed deposits, a senior citizens savings scheme, a national savings certificate and a national pension scheme. Money spent for taking care of parents’ health, donations to charities, long-term capital gains, and loans to major children is a deduction from the income tax. According to the finance act, 2020, section 54, there is room for reduction from long-term capital gain investment in residential houses. The assessed can invest in buying or building two residential houses, and it is exempted if the amount is less than 2 crores. Sections 80C, 80CCD, 10(10D), 80CCC, 80 GGC, and 80D deal with deductions. The blog provides insight into the available deductions for 2023 tax planning. The tax planning of individuals and corporates differ. The lock-in period, tax deduction and tax burden decide the financial schemes suitable for tax planning. After understanding the best ways to save tax, tax professionals find it easy to understand the queries of clients and different types of businesses. The new tax regime considers 50,000 as a standard deduction in the income tax. ITR-1 is the form for income tax. ITR-3 is the form for business income.
Tax savings for a married couple with double income:
In case, the husband and wife are working, they are eligible to claim more than 8.5 lakhs of deductions. The financial products that are eligible for the deduction are insurance schemes and investment schemes. The following points explain the tax savings of salaried couples:
• Section 80C provides more than three lakhs of savings.
• They can go for term insurance with 15 to 20 times the annual income.
• The annual income can be used for market-linked investment schemes. The wide range of financial products that offer savings is ULIP, equity-linked savings schemes, and child plans.
• They can go for PPF investment. The PPF scheme is a long-term investment with 15 years period. The amount paid for one year is shown as a deduction in the income tax calculation. The return and interest earned from the PPF account are not charged under income tax. The return from the investment is fixed. It has a minimum risk factor. PPF account is opened with one name and a single time only.
• The couples can go for the national pension scheme. It is the scheme from the Indian government that help with retirement. The eligible candidate should be an employee of a corporate company. He or she should be an Indian citizen.
Tax savings for a senior citizen:
Senior citizens enjoy certain privileges in the tax system. Senior citizens looking for a regular flow of income. The following schemes are useful for senior citizens:
• Senior citizens give preference to regular income and premature withdrawals. The annuity schemes backed by the Indian government offer tax benefits to them. The senior citizens saving scheme in a bank and post office help with the flow of money after sixty years of age.
• The insurance companies offer various options to senior citizens through the special annuity plan.
• The ULIP offers a tax exemption of 1.5 lakhs. The deduction is included in the 80C section. Section 10D helps to enjoy tax-free returns after maturity.
Deduction under 80C:
Section 80C deals with investments with an upper limit of 1.5 lakhs per year. Income tax provides a deduction to the investment as per the circulation of money. If the taxpayer invests in medical insurance, he can include the insurance amount in 80C. The premium paid for the medical insurance is shown in section 80CCD (1B). The financial products eligible for investment to claim 80C deduction are as follows: EPF, LIC premium, PPF, equity-linked saving scheme, home loan, stamp duty for the purchase of property, registration charges for the purchase of property, SSY, SCSS, NSC, ULIP, infrastructure bonds and fixed deposit for five years.
Deduction for 80CCC:
Section 80CCC deals with the contribution towards the pension funds from a life insurance policy. The maximum amount allowed for deduction is 1.5 lakhs per annum. The Hindu undivided family and individual taxpayers are eligible to claim this deduction. The deduction amount of 1.5 lakhs is the sum of the investments from sections 80CCC, 80C and 80CCD. The financial products related to the 80C are as follows: ELSS, NPS, PPF, NSC, FD SCSS, ULIP and SSY. NSC, fixed deposit, Sukanya samriddhi yojana, and senior citizen savings scheme are risk-free investments. Equity-linked savings schemes, national pension schemes, and unit-linked insurance plans include the risk that is influenced by the equity market. It is an equity-related risk. The financial product with risk-free return offers interest. The financial product with equity-related risk offers interest and appreciation. The return is not a guaranteed one. It has a lock-in period of three years. Investment for a long time offers high returns. The return is performance oriented. The investment has risk and inflation-beating factors.
Deduction for 80CCD (2):
Section 80CCD allows for a 10 percentage of deduction from the sum of basic salary and dearness allowance or investment made in pension schemes. The Atal pension yojana and national pension system get a deduction of two lakhs. Section 80CCD has two sections. The number one section is the contribution of self to the pension fund. Number two section is the contribution of the employer to the pension fund. The rule is 10 per cent of the income or the contribution. The deduction amount is 1, 50,000 or 2, 00,000.
How does budget 2023 promote ease of doing business?
The Indian government designs plan to promote business, investment and employment. Ease of doing business is the goal behind the budget schemes. The year 2014 and 2019 state that there is a rise in the global ranking in India for the ease of doing. India climbed the global rank by the world bank from 142 number to 63 number. The digital process and technological advancement are part of the government scheme. The PAN number and GST amendments are introduced to integrate the system and make the processes faster. From 2023 to 24, the Indian government relaxed the burden of businessmen with changes to 3,400 legal provisions. The Indian government has been practising the following schemes for the growth of the industries: PM Gati shakti, remission of duties and taxes on exported products, PLI schemes, India industrial land bank, national single window system, national logistics policy and business reform action plan.
Conclusion:
From the viewpoint of the common man, the budget is to promote the habit of saving or investing. During inflation, investment is a risky one. So, a taxpayer will look for a saving scheme with less risk. In times of economic growth, investment is the right option to double the money and benefit from tax planning. Thus, a taxpayer will look for investment options and financial products that match his capacity. By understanding the controversial effect of the budget, a chartered accountant can provide efficient tax planning to corporates and individuals.
