The start of the new financial year (FY) 2022–23 (i.e., April 1, 2022–March 31, 2023) is finally around the corner, and income taxpayers should start planning to save tax before the last minute rush . Relief from tax burden. According to a meeting, here’s how taxpayers can reduce income tax under different sections in FY 22-23 Dr. Suresh Surana, Founder, RSM India,
Dr. Suresh Surana said that the extant provisions of the Income Tax Act, 1961, (‘IT Act’) provide several opportunities to the taxpayer to legitimately save tax in various forms such as deductions, exemptions, allowances etc. Many of the above benefits are subject to certain conditions such as threshold limit, lock-in period etc. Some of the widely used clauses in which taxpayers can reduce their tax liability are briefly given below:
A. Availing of certain deductions U/C VI-A (Indicative List)
| serial number. | section | deduction | amount of deduction |
| (I) | 80c | Individuals and HUFs can avail deduction under this section on investment in certain instruments like LIC premium, ELSS scheme, PPF contribution, fixed deposit, National Savings Certificate (NSC), etc., subject to fulfillment of prescribed conditions. In addition to the above investments, expenses such as tuition fees for full-time education of children in India and repayment of housing loan principal can also be claimed under this section. | Rupee. 1,50,000 |
| (Second) | 80ccd(1b) | Individuals are eligible to avail additional deduction under this section for contribution to National Pension Scheme (NPS). Such deduction exceeding the threshold limit of Rs. 1,50,000 provided under section 80C of the IT Act. | Rupee. 50,000 |
| (iii) | 80d | Premium paid by an individual in respect of medical insurance or contribution to a Central Government health scheme/notified scheme for self, spouse, dependent children or parents |
Rupee. 25,000 / Rs. 50,000* * Upper limit of Rs. 50,000 will be applicable when medical insurance is purchased in respect of the health of a senior citizen. Senior citizens above the age of 60 years who are not covered by health insurance will be allowed a deduction of Rs. 50,000 for actual medical expenses. In addition, deduction of 5,000 will be available within the above limits for any payment made for preventive health check-up. |
| (iv) | 80g | Any assessee can claim deduction under this section for donations made to approved charitable institutions. | 50% or 100% deduction (with or without qualifying limit) depending upon the organization/institution to which such donation is made. |
| (V) | 80 gg | Any person who spends on rent and neither receives HRA from his employer nor owns residential accommodation (either in his own name or in the name of spouse or minor child) is eligible for deduction under this section. would be eligible to claim. |
of the following – One. Rupee. 5000 / month B. 25% of ATI* C. Actual fare reduced by 10% of ATI* *ATI = gross total income as reduced by deduction under Chapter VIA (except u/s 80GG) |
| (v) | 80TTA/80TTB |
Every individual and HUF who receives interest income from savings bank account can claim deduction under section 80TTA. However, to benefit resident senior citizens, the scope of deduction under section 80TTB is being widened to include deduction for interest income on fixed deposits. |
Rupee. 10,000 u/s 80 tta Rupee. 50,000 u/s 80TTB |
B. Avail eligible exemption under section 10 (indicative list relevant to salaried employees)
| serial number. | section | allowance | discount amount |
| (I) | 10(13A) – House Rent Allowance (‘HRA’) | Every salaried employee who is in receipt of HRA and who lives in a rented accommodation can avail exemption under this section, provided he does not own any residential accommodation. |
At least one of the following: (a) Actual HRA received (b) 40% of the salary* (50%, if the house is situated at Mumbai, Calcutta, Delhi or Madras) (c) Rent paid in excess of 10% of salary* * Salary = Basic + DA (if part of retirement benefits) + Turnover based commission |
| (Second) | 10(14) – Special Allowances |
(i) Many persons are getting conveyance allowance, daily allowance, helper allowance, uniform allowance from their employer. (ii) Salaried persons may also get some special allowances like Children’s Education Allowance, Children’s Hostel Expenses Allowance etc. |
Lower of: (a) allowance received, (b) amount actually spent. Up to Rs. 100 per month (for education) / 300 per month (for hostel) – Maximum of 2 children per child. |
| (iii) | 10(5) – Leave Travel Allowance (LTA) |
Every employee who is in receipt of LTA can claim deduction in respect of expenditure (for self and family) incurred for travel in India. * Family = spouse and children; parents, brothers and sisters who are wholly or mainly dependent on the individual |
LTA exemption can be availed for two journeys performed in a block of 4 calendar years i.e. 2022-2025 as per the prescribed conditions. |
C. Reviewing taxable income and tax optimization opportunities (such as in the case of any capital gains)
(I) If the taxpayer has capital gains income during the year – taxpayers can review their portfolio of stock holdings and look for opportunities to book capital losses by selling listed shares/units for the purpose of netting off capital gains. Total tax liability. Please note that long term capital loss can be set off against long term capital gains during the year, whereas short term capital loss can be set off against both long term capital gain and short term capital gain.
(Second) Utilization of the threshold limit of Rs. 1,00,000 under section 112A of the IT Act – Long-term capital gain (on listed shares transferred to stock exchanges) is exempt to the extent of Rs. 1,00,000 and above is taxed at the rate of 10%. As such, taxpayers who wish to utilize this limit can plan to liquidate such holdings and optimize their tax return based on factors such as funding requirements, investment objective, risk appetite, market factors, among others. Evaluation of investment options etc.
(iii) Use of Cost Inflation Index (CII) in case of sale of eligible long-term capital asset – When a taxpayer sells a long-term capital asset (eg house property held for more than 2 years, unlisted shares for more than 2 years) . , debt mutual funds held for more than 3 years, etc.), they can increase the cost by the indexation factor and claim the benefit of indexed cost, thereby reducing the capital gains that will be chargeable to tax.
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