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Key things to remember during income tax planning for FY 2021-22

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Income tax planning for FY 2021-22: First quarter of FY 2021-22 is gone and if you haven’t done your income tax planning,, then it’s not too late as there is still eight and half month left to do that. According to tax and investment experts, income tax planning for salaried employees is an important financial event and one must take it seriously as a penny saved is penny earned. Experts went on to add that while doing income tax planning, one needs to first exhaust its 1.5 lakh annual limit under Section 80C and then an additional 50,000 allowed under Section 80 CCD (1B) on one’s investment in National Pension System or NPS scheme. However, this is not enough as there are various other aspects like mediclaim benefits, tax efficiency of one’s investment, etc. that also needs special attention by the taxpayer.

Speaking on income tax planning for salaried employees Balwant Jain, a Mumbai-based tax and investment expert said, “The taxpayer should first try to exhaust its Section 80C limit of 1.5 lakh per annum. After this, he or she should move towards Section 80 CCD (1B) where an additional 50,000 annual benefit is given under NPS scheme investments.” Jain said that Section 80C includes options like PF deductions, life insurance premium, school fee for children, etc.

On what next on income tax planning after exhausting Section 80C and Section 80CCD(1B) limits Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, “Once, Section 80C and Section 80 CCD(1B) limit is exhausted, the income taxpayer needs to look at Section 80D and Section 80G of the income tax act. In Section 80D of the income tax act, an earning individual is given income tax exemption on mediclaim of 25,000 for himself and an additional 25,000 for its dependent parents. In case, the dependent parents are senior citizen, the mediclaim up to 50,000 for parents paid by the earning individual is income tax exempted. If an earning individual has done charity or donation, then 50 per cent of the donation is income tax exempted under Section 80G provided the receiver has Section 80G certificate issued by the Government of India.”

Advising taxpayers to look at the tax efficiency of one’s investment during income tax planning; SEBI registered tax and investment expert Jitendra Solanki said, “One needs to look at the tax efficiency of one’s investment like FD (fixed deposit). If it’s yielding more than 10,000 in one financial year, then one can move some FD amount to debt mutual funds (MFs) with 2-3 years time horizon where short-term debt MFs may yield to the tune of 6.0 to 6.5 per cent per annum and the income will get added to one’s net annual income as LTCG on debt mutual funds becomes applicable only when the investment period is 3 years or more.”

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