Tax-saving schemes in the new tax regime of 2023

For the general middle-class Indian families who constitute the principal majority of tax-payers, tax saving is a major concern for them after each budget. They desire to acquire as much income tax return as possible, maintaining the legal standards. 

With the new year budget being revealed on 1st February 2023, we have witnessed certain changes, additions, and alterations in the tax regime as per expectations. There have been several changes in the horticultural sector, scientific sector, games, clean energy, etc. However, the general public is most concerned about tax-saving schemes, an aspect that directly affects their lifestyle and finances. 

Basic highlights of tax-saving schemes as per the New Tax Regime of 2023:

Some of the most important noteworthy highlights of the Union Budget 2023 are as follows:

1. The Senior Citizens’ Savings Scheme (SCSS) limit has been increased to INR 30 lakhs from INR 15 lakhs.
2. The Monthly Income Scheme (MIS), one of the most popular Indian deposit schemes, has been enhanced from INR 4.5 lakhs to INR 9 lakhs for a single account and from INR 9 lakhs to INR 15 lakhs for joint accounts. 
3. Mahila Samman Savings Certificate is now to be made available for 2 years at a 7.5% per annum rate of interest with a partial withdrawal facility.
4. The standard income tax rebate limit has been heightened from INR 5 lakhs to INR 7 lakhs under the new regime.
5. The new tax regime has reduced the total number of tax slabs from 7 to 6.
6. The new tax slab runs like this: 
   1. INR 0-3 lakhs- Nil; 
   2. INR 3-6 lakhs- 5%; 
   3. INR 6-9 lakhs- 10%; 
   4. INR 9-12 lakhs- 15%; 
   5. INR 12-15 lakhs- 20%, 
   6. Above INR 15 lakhs- 30%. 
7. The tax exemption limit on leave encashment has been significantly raised from INR 3 lakhs to INR 25 lakhs.
8. There has been an increase in the standard deduction.
9. The highest income surcharge has been reduced from 37% to 25%.

However, the tax-saving investments are applicable only under the Old Tax Regime. However, the Union Budget 2023-24 have proposed certain deductions in the New Tax Regime as well, such as:

1. The standard deduction is for all salaried-income people, including pensioners as well as their family pensioners.
2. A deduction for any contribution made towards the Agniveer Corpus Fund.
3. Any contribution made by the employer towards an employee’s NPS (National Pension System) under section 80CCD (2).

However, if you wish to avail further tax exemptions, you would have to opt for the Old Tax Regime, where there are quite a few options for tax-saving investments.

Tax saving schemes based on the 2023 Union Budget:

Tax saving is a major concern for every responsible taxpayer in the country. It requires proper planning and management to ensure and optimise your tax saving and enhance your income tax return at the end of the year. In this article, we will highlight some of the significant aspects of tax saving in the context of 2023:

• Keeping yourself updated:

Considering the overall digital advancement in almost every sector, the Indian government has launched a special website for taxpayers, especially working professionals. You must regularly visit this website to know the latest advancements and trends and update yourself accordingly. 

• Uniform KYC norms:
  The Union Budget 2023 has proposed uniform KYC (know your customer) rules for easing the entire process through PAN and Aadhar Card numbers through Government-authorised digital lockers such as DigiLocker.
• Ensure to invest rightly for optimisation of taxes:

Your investment strategy should utilise the relevant tax breaks per the legal mandates. Some of the best tax-saving investment tools include life insurance, ULIPs, NPS, EPF, PPF, SSY, SCSS, ELSS, 5-year FDs, etc., under section 80C upto INR 1.5 lakhs per annum.

• Protect your family for health emergencies:

Investing in the best health insurance in India not only acts as a financial safeguard while protecting your health, it even takes care of your tax liabilities as well. Thus, opting for the best health insurance in India also allows tax deductions under Section 80D of the IT Act.

Premium paid towards a health insurance plan for yourself, your spouse, and your dependent children are exempted from income tax upto INR 25,000 per annum u/s 80D. However, if you or your spouse is more than 60 years of age, the exemption limit is enhanced to INR 50,000.

Additionally, if you pay for the health insurance premium for your parents as well, you can avail of another tax exemption of INR 25000 (INR 50,000 if any of your parents are more than 60 years of age).

So, you can look for the best health insurance in India which suits your requirements and then opt for the same accordingly.

• Punctual tax payment and ITR filing:

As a responsible taxpaying Indian citizen, you must always pay your taxes on time and claim for an Income Tax return prior to 31st July of every year or as per the date mentioned by the IT Department. In case you fail it, a penalty will be levied against you. Therefore, maintaining punctuality in both these aspects is essential to reduce an enhanced tax burden. 

• Choose a precise tax regime maintaining a corporate structure:

Choosing the precise tax regime is essential to secure optimum tax savings. At present, there exist two tax regimes, among which you can choose one according to your convenience. The older tax regime allows tax savings investments. However, you can also opt for the new tax regime for reduced income tax outgo. 

• Manage cash flows with the maintenance of a proper book of accounts:

Updated maintenance of a proper book of accounts is essential for every taxpayer, especially working professionals. This ensures proper substantiation of the expenses and revenues before the authorities and avoids further tax liabilities.

Moreover, managing the cash flows is also very essential. If the cash flow limit exceeds the INR 50 lakh mark, the professionals stop receiving coverage from Section 44ADA.

Income tax savings tips for salaried and non-salaried individuals:

The Indian IT Department allows tax benefits in several sectors, and you need to keep track of all these applicable avenues and plan well in advance. Enhanced investment in the EEE (exempt-exempt-exempt) category and maintaining the specified threshold allow your tax benefits. Moreover, other options allow deduction claims for every taxpayer. 

Conclusion

This is a comprehensive account of avenues you can utilise for tax savings and optimise your income tax return.  You must keep yourself updated and exercise solid planning to enjoy the benefits. 

Disclaimer: The above information is for illustrative purposes only. For further details, please refer to the policy wordings and prospectus before concluding the sales.