Top Tax Saving Tips For Individuals And Businesses In India – Income Tax Act New Regime

In an effort to simplify the tax structure and provide relief to taxpayers, the Indian government introduced a new tax regime under the Income Tax Act. The new regime, which came into effect in the financial year 2020-21, offers lower tax rates and fewer deductions and exemptions. This blog post will discuss the top tax-saving tips for individuals and businesses under the new tax regime in India.

1. Choose Between the Old and New Tax Regimes

Before diving into tax-saving strategies, taxpayers must decide whether to opt for the new tax regime or stick with the old one. The new tax regime offers lower tax rates but removes most deductions and exemptions. Therefore, taxpayers should carefully evaluate their financial situation and tax-saving needs before making a decision.

2. Maximize Standard Deduction

Under the new tax regime, individuals can still claim the standard deduction of INR 50,000, which is available to salaried employees and pensioners. This deduction can help reduce your taxable income, leading to tax savings.

3. Claim Deductions for Employer’s NPS Contribution

Although most deductions are not available in the new tax regime, individuals can still claim deductions for their employer’s contribution to the National Pension System (NPS) under Section 80CCD(2). This deduction can help save taxes, especially for those in the higher tax brackets.

4. Opt for Tax-Free Perquisites

Employers can offer tax-free perquisites to their employees, which can help reduce their taxable income. Some examples of tax-free perquisites include food coupons, mobile phone reimbursements, and internet reimbursements. Consult with your employer to explore the available options.

5. Tax Planning for Businesses

Businesses can continue to claim deductions and exemptions under the new tax regime. However, they must carefully evaluate their expenses and investments to ensure they are maximizing their tax savings. Some strategies businesses can employ include:

Utilizing the Presumptive Taxation Scheme for small businesses b. Maximizing Input Tax Credit (ITC) under the Goods and Services Tax (GST) regime c. Investing in tax-saving instruments, such as infrastructure bonds and venture capital funds

6. Seek Professional Guidance Tax planning can be a complex process, especially with the introduction of the new tax regime. It is advisable to consult with a professional chartered accountant to help you understand your tax-saving options and make informed decisions.

Conclusion

While the new tax regime in India offers lower tax rates, it also limits the available deductions and exemptions. By carefully evaluating your financial situation and utilizing the available tax-saving strategies, individuals and businesses can make the most of their tax-saving opportunities under the new Income Tax Act regime.