Tax Saving Schemes to Implement Before March 31st

With proper tax savings, you can save more of your hard-earned money. As the financial year draws to a close, it is important to look back at your tax habits and check if you have missed out on any outstanding payments. The deadline to take advantage of various tax-saving schemes to maximize your earnings is March 31.

In this article, we take a look at some last-minute strategies on how you can save taxes for the financial year ending March 31, 2023. Read on.

How to Save Tax Before March 31st, 2023?

Here are some options that you can consider to save tax before 31 March 2023:

Invest in ELSS Funds

Equity Linked Saving Scheme (ELSS) is a tax-saving mutual fund scheme that has a lock-in period of 3 years. By investing in it, you can claim tax deductions up to Rs. 1.5 lakh per year under Section 80C of the IT Act from your gross total income. However, to claim these deductions, investment needs to be done before March 31.

Although ELSS is known to yield high returns, it also carries higher risks because it invests in equity shares.

Open a National Pension Scheme (NPS) Account

NPS is a tax-saving retirement fund that lets you create a pension corpus. When you exit the NPS on retirement, you need to buy an annuity plan with at least 40% of the accumulated corpus. Your own contribution and your employer’s contribution to NPS is deductible from your income. Your contribution is capped at 10% of your salary income up to Rs 1.50 lakh under section 80C.

You can also claim an additional tax deduction of up to Rs 50,000 under section 80CCD (1B), over the limit of Section 80C. If you are self-employed, 20% of the gross income can be claimed as a deduction.

Submit Proof of Investments to Your Employer

Don’t forget to submit proof of your tax-saving investments and payments before March 31. This way, your employer can deduct the correct amount of tax at source (TDS). It will help you avoid an unnecessarily high deduction of TDS from your account. The proof may include rent receipts, travel expenditures, interest certificates, etc.

Pay Your Advance Tax

If you are liable to pay advance taxes, you have to clear your income tax payments beforehand in installments to avoid paying interest. Four days are allocated in a fiscal year for the completion of income tax dues. These four installments have to be paid by June 15, September 15, December 15, and lastly by March 15, respectively. If there is any balance advance tax payable, after adjusting the TDS that may have been deducted, you can pay it by March 31.

It must be mentioned here that you need to pay income tax in advance only if you have an advance tax liability of more than Rs. 10,000 after considering the TDS deducted against your other incomes. In the case of failure to make adequate advance tax payment, you will be liable to pay interest on the unpaid advance tax amount at 1% per month or part of it.

Invest in Tax-Saving Schemes

March 31 is also the deadline for investing in certain tax-saving schemes like Sukanya Samridhhi Yojana (SSY) and PM Vaya Vandana Yojana (PMVVY). Investing in SSY for a maturity period of 21 years for a girl child will allow you to claim tax deductions of up to Rs. 1.5 lakh per year under section 80C. On the other hand, senior citizens can apply for PMVVY, an insurance-cum-pension scheme to avail 7.4% interest per annum and save taxes.

Additional Things to Do Before March 31st

Here are some additional tax-related things you should complete before March 31:

Make Charitable Donations

Section 80G used to be one of the best ways to save taxes in India. However, the new personal income tax regime will cut down on tax benefits that were previously available on charitable donations. Therefore, if you chose to pay taxes under the old personal income tax regime and wish to avail tax deductions, you have to donate to some specified charitable institutions or relief funds before March 31, 2023.

Remember that donations beyond Rs. 2,000 should be made via any mode other than cash to qualify for tax deductions.

Purchase a Life Insurance Policy

The new Budget 2023 excludes complete tax exemption on non-linked insurance policies like life insurance. In other words, post March 31, you will have to pay tax on returns from insurance policies if your yearly premium is above Rs 5 lakh. This new tax on high-value insurance savings products will not be applicable in case the proceeds are received on the death of the policyholder.