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What You Can Do Right Now to Make 2021 Your Best Tax Year Ever

Shrijay Sheth 
on 18 February 2021

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Traditional tax planning has always been transactional, and it is not as fruitful as it sounds to us. You ask questions to prepare your taxes and check out what you do in the grim times.

Making a long-term plan of action for your taxes is how to make real savings, but it requires months to create an effective plan that would work with businesses. For instance, LegalWiz.in got funded 3.86 crore which will change the way business owners and investors operated prior to that in terms of taxation. This is why it gets critical to plan your tax year in advance and thereby sorting your finances to leverage benefits.

What You Can Do Right Now to Make 2021 Your Best Tax Year Ever

Examining income

Many accountants advise pushing income to the next year. There are a plethora of different elements to take heed of while deciding whether to do first or not. First, by presenting your income low to lose deduction? Here, many personal deductions do not carry over the next year. Instead of taking deductions now, you might intend to raise your income to utilize all your deductions. Another element to take heed of here is, following year’s tax rates. There is a possibility that the income tax rate would be higher this year, hence, the best plan would be to raise your income this year to avoid paying the higher rate.

Identify opportunities

We do not know about the political and economic uncertainty that is lying ahead, there might be a chance we can witness another economic downturn this year. We would get an ample number of opportunities to get success during dire times, but if we do not plan for them, we would be left with nothing. Now that you have an income tax plan at hand to minimize your taxes, you can further plan to utilize those savings into an investment when the market looks bearish and acquisitions are relatively cheaper. We all have seen the winners and losers after the great recession of 1929, so be prepared and have a plan at hand to take advantage of opportunities that are lying ahead of us.

 

Becoming something that tax law favors

While strategizing to make investments, take heed of if they are the ones the government prompts you to make. Tax laws are an omnibus of incentives for investors and business owners. It is easy to be a beneficiary of the opportunities when you comprehend how the rules can favor you.

The government inclines towards the producers such as real estate investors, business owners, and commodity providers. It has made substantial tax incentives for such activities because they run the engine of the country’s economy and growth. While customers generally owe 40% in taxes, producers can pay less than 20% with ease in taxes based on their respective activities. This reduction in taxes enables individuals to register a new company in India and to reinvest in the right way to enhance their wealth.

As you can see, minimizing your payable taxes is an invaluable and time-demanding process. While last year was very tough on us, personally and professionally, 2021 has a lot to offer to us in terms of opportunities for those who plan proactively and appropriately. Not to allow yourself to be held up by a tax rut doing the same things you already have been doing for a long time. Time is perfect for evaluating your plan and setting yourself up for your best tax for this year.

Sukanya Samriddhi Yojana (SSY)

It is possible to open the SukanyaSamriddhi Scheme account on behalf of a girl before she reaches 10 years. Deposits accounted for 7.6%. The account can be opened with a minimum amount of Rs 250, and any amount can be deposited in multiple amounts of Rs 100. Under section 80C of the Income Tax Act, the deposits made on the account, as well as the proceeds and maturity number, will be entirely exempted from tax.

Life Insurance Premium

Not only does a Life Insurance policy give you a cushion against uncertain situations, but you also accept the Life Insurance Premium charged for a tax deduction under Section 80C. You can claim premium deductions paid to you, your spouse and your children; no deduction is provided for premiums paid to your parents.

 

Infrastructure Bond

By investing in a government-approved benefit plan under Section 80CCF, tax payers will benefit from tax-saving advantages. The maximum deduction amount for an assessment year under Section 80CCF is Rs 20,000.

National Saving Certificate (NSC)

Once again, National Savings Certificates are a very good investment choice for people with a low-risk appetite. NSC provides you with an interest rate of 6.8 percent compounded annually but taxable at maturity. Under Sec. 80C of the IT Act, NSC deposits also qualify for tax rebates.

Other tips for tax savings

  • Section 80E of the tax deduction includes the interest charged on education loans in the country.
  • The tax deduction is available under section 80RRB on income received from royalties and patents. Up to the sum of Rs3,00,000, income tax can be saved for the patent registered under the patent act 1970.
  • The tax deduction for people with disabilities is available under section 80U of the Income Tax Act. You need to display your disability certificate to benefit from the tax advantage under this provision. Up to Rs1,00,000 can be non-taxed, depending on the nature of the impairment.

There are several more forms in India that can help you save taxes. Amounts of gifts are excluded from tax on marriage or inheritance from a will. It is advantageous for you, your partner and/or child to receive medical benefits, and at the same time, a tax benefit may be claimed from it. In addition to the strategies listed above, travel and food expenses may be filed for entrepreneurs and individuals to save on tax.


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