What is the deadline for making tax-saving investments?
Remember that as of the 2020-2021 fiscal year, an individual has the option of choosing between the old / existing tax regime and the new tax regime. If a person opts for the old / existing tax regime, then they will be able to claim tax exemptions such as rent allowance, travel leave / LTC voucher program and deductions under sections such as 80C (maximum up to Rs 1.5 lakh during the year), 80D (deduction on the medical policy premium paid), 80E (interest paid on the student loan) etc.
Let’s see by how much your tax payable will increase if you don’t make tax-saving investments. Suppose your total income during the fiscal year is Rs 10 lakh and you cannot invest Rs 1.5 lakh under section 80C in specified instruments such as public provident fund, government plan. savings linked to shares, etc., then your tax payable will be Rs. 1.17 lakh (under the old tax system, 4% incl. tax). If you realize a tax saving of Rs 1.5 lakh under section 80C, your tax payable will be Rs 1.06,600 (including 4% tax). This is a difference of Rs 10,400.
Now, if you opt for the new tax regime, it comes with lower and favorable tax rates, but without the common tax exemptions and deductions mentioned above. In the new tax system, only the deduction that is available is under section 80CCD (2) – employer’s contribution to the employee’s NPS account.
If you opt for the new tax regime, at the time of filing the income tax return your tax payable in the above scenario will be Rs 78,000 (including 4% tax).
According to tax experts, if the total deduction you claim in a fiscal year exceeds Rs 2.5 lakh, then you are better off under the old tax system.
Read also: Request a deduction greater than Rs 2.5 lakh? you will not gain much
What you should do
If you still haven’t finished your tax saving exercise, there are some online options available to you, such as fixed 5-year bank deposits, prepayment of a home loan, and more.
Read also: 7 investments to achieve tax savings online
If you are faced with a lack of funds due to which you cannot invest in tax saving instruments on time, certain expenses are eligible for deductions under the Income Tax Act. These include the children’s school fees, the repayment of the principal of the mortgage. In addition, the interest paid on the home loan also offers a tax benefit.
Read also: How to save tax without new investments
With March 31st being the last day of the fiscal year, make sure you have deposited the minimum amount into tax savings such as the Public Provident Fund etc. If the minimum amount is not deposited, the accounts will become inactive.
Also Read: Invest In These Tax Savers To Avoid Making Your Account Inactive