Follow these tax planning tips for maximum tax savings in 2023

Date : 27/02/2023
Read: 3 mins

As per the proposals made in the Union Budget 2023, salaried individuals with an annual income of up to Rs. 7 lakh won’t have to pay income tax if they opt for the new tax regime. One can also opt for the old tax regime if one wants to make tax-saving investments.

Like every year, the Finance Minister of India, Mrs Nirmala Sitharaman, presented the Union Budget 2023 on the 1^st of February. The government made several changes to the existing income tax structure this time. Some of the most significant changes include the enhancement of the tax rebate under Section 87A, a decrease in the number of tax slabs, and a reduction in the highest surcharge rate.

After the implementation of the changes proposed in the budget, many individuals may have to alter their tax planning to ensure they pay minimum taxes to the government. Here, in this article, we will discuss how you can plan for maximum tax savings in the coming financial year.

Invest as per your financial goals

As per the proposals made by the Finance Minister, the tax rebate limit under Section 87A has been increased from Rs. 12,500 to Rs. 25,000. Further, salaried individuals with an annual income of up to Rs. 7 lakh won’t have to pay any tax after claiming the tax rebate and a standard deduction of Rs. 50,000. However, this is only applicable if you opt for the new tax regime.

Individuals with an annual income of up to Rs. 7.5 lakh can now opt for the new tax regime to ensure they pay zero taxes. If you fall under this income category, you can opt for the new tax regime to minimise your tax outgo. However, you won’t be able to claim additional tax deductions.

Also Read: New Tax Regime Vs Old Tax Regime: Should You Switch?

Opt for the old tax regime if you want to make tax-saving investments

If you want to claim tax benefits under the Income Tax Act 1961, you will need to opt for the old tax regime. This can also be beneficial if your annual income exceeds Rs. 7.5 lakh. If you choose this option, you can consider making tax-saving investments in instruments like the Public Provident Fund (PPF), National Savings Certificate (NSC), and Equity Linked Savings Scheme (ELSS), among others, and claim a tax deduction of up to Rs. 1.5 lakh p.a. Additionally, you can invest in health insurance policies for yourself and your dependents to further reduce your tax outgo.

Also Read: How To Save More On Taxes When You Have exhausted All Other Tax Saving Investment Options?

Impact of proper tax planning on taxpayers

After the proposed changes in the personal tax regime are implemented, they are expected to bring tax relief for consumers and make the process of Income Tax Return (ITR) filing easier. However, it is important to remember that even though the government has made it easier for individuals with an annual income of up to Rs. 7.5 lakh to avoid paying tax, it is vital to still invest in avenues like ELSS, ULIPS, mutual funds, retirement plans, and small savings schemes based on your financial goals and risk appetite.