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TAX PLANNING IN FY22: A QUICK GUIDE ON HOW TO PLAN IT IN THE CURRENT FINANCIAL YEAR

Serlyn Shetty by Serlyn Shetty
3 months ago
in Finance
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Efficient tax planning is as important as investing in the right types of investments for wealth creation in the long term. The idea behind tax planning should not be one as a mandatory year-end activity but as a recurring activity while taking the long-term view. The earlier you start, the higher is the probability of efficient tax planning. This article aims to serve as a quick guide in tax planning in FY22.

TAX PLANNING

The Budget 2020 proposed a new tax regime with slashed income tax rates and narrower income tax slabs. However, this also meant that one would have to let go of certain deductions and exemptions available in the old tax regime. Investors are given a choice to choose between the old tax regime and the new tax regime.

Article Summary show
Income tax slabs for FY 2022
A total of 70 deductions are exempted under the new tax regime. Some of them are listed below:
Understand your taxable income

Income tax slabs for FY 2022

The following table summarises the income tax rates for both the existing tax regime and new tax regime:

Income tax slabOld tax regime (with deductions)New Tax regime (without deductions)
Income up to Rs. 2,50,000NilNil
Rs. 2,50,001 to Rs. 5,00,0005% of the total income that exceeds Rs. 2.5 lakh*5% of the total income that exceeds Rs. 2.5 lakh
Rs. 5,00,001 to Rs. 7,50,00020%10%
Rs. 7,50,001 to Rs. 10.00,00020%15%
Rs. 10,00,0001 to Rs, 12,50,00030%20%
Rs. 12,50,001 to Rs, 15,00,00030%25%
Rs. 15,00,000 & above30%30%

A total of 70 deductions are exempted under the new tax regime. Some of them are listed below:

  • Section 80C investments such as ELSS funds, National Savings Certificate (NSC), Unit-Linked Insurance Plan (ULIP), Public Provident Fund (PPF), bank fixed deposits (FD), etc.
  • Interest on education loan
  • House rent allowance
  • Interest paid towards housing loan
  • Savings bank interest
  • Professional tax
  • Medical insurance premium
  • Standard deduction
  • Relocation allowance
  • Conveyance
  • Leave travel allowance
  • Helper allowance

However, there are around 50 tax exemptions that have been left untouched. Some of these include:

  • Standard deduction on rent
  • Retrenchment compensation
  • Leave encashment on retirement
  • Agricultural income
  • VRS (Voluntary Retirement Scheme) proceeds
  • Income from life insurance

Understand your taxable income

One of the biggest misconceptions among investors is that their CTC (cost-to-company) component is the same as their taxable income. Nevertheless, this is not entirely true. Depending on the tax regime you choose, different tax deductions and exemptions would be available to you to significantly lower your tax outgo. It is essential to assess your taxable income to get fully benefited from tax deductions and exemptions. Therefore before you begin with your tax planning for any financial year, understand the different components under your payslip and evaluate which of them are taxable.

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Efficient tax planning can help you to save money on tax, which ultimately equals greater take-home returns. Thus, you should carefully plan your tax-planning investments. You can also take help from a professional who will break out the best route for you to lower your tax outgo. Happy investing!

*A standard deduction of Rs 50,000 is available under the Old tax regime making the total taxable income zero

Tags: deduction under section 80celss tax saving mutual fundsinvesting in mutual fundsmutual fund investmentmutual fundstax saving mutual fundstypes of investmenttypes of mutual funds
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Serlyn Shetty

Serlyn Shetty

While going towards reading some of the blogs, I have learned about Blogging and writing articles of my own.I have started writing on blogs since 2014, and I give my best time in blogging for writing and learning new things daily.If you love my article, then do share with your friends and family hope they will like to read it too.

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