In the month of January and February, a common thing that bothers salaried classes is mounting tax liability. With the Assessment Year 2023–24 approaching, taxpayers are looking for ways to reduce their personal income tax burden and make the most of their hard–earned money. The simple reason for mounting tax liability, in my opinion, is, we act against a fundamental method of tax planning i.e., “Plan early for tax saving to prevent any stress or hassle” and to procrastinate till the last month of the financial year, resulting in hurried decisions. So why don’t we spend some time organising our tax plan and understanding different tax saving options and schemes? In fact, the right time to do the tax planning is the beginning of the financial year. Ideally speaking, we must first know about our tax liability at the beginning of the financial year before we ascertain the amount of tax that we are supposed to pay by the end of the financial year. Equally important is that we must spend some quality time understanding the various tax-saving options and comparing their benefits and limitations.
To dig deeper into various ways we can save tax, it is imperative for a teacher to understand the concepts like “Tax Avoidance” and “Tax Evasion” which are integral parts of tax planning. To the best of my understanding, the first step towards understanding how to save income tax is to know about tax avoidance. Though the difference between tax avoidance and tax evasion to a major extent boils down to two elements i.e. lying and hiding. While the former allows the taxpayer to make use of legal methods to reduce taxable income or tax owed the latter is a form of tax fraud that involves the use of illegal methods to conceal income or information from tax authorities in order to avoid the assessment or payment of taxes. Although tax avoidance is lawful in the sense that it allows the taxpayer to take unfair advantage of the shortcomings in the tax rules by finding new ways to avoid the payment of taxes. But in the past, in some cases, it has come in the category of crime. The latter is and was never advisable as it manipulates the law for one’s own benefit which could lead to penalty or imprisonment if one is found guilty.
Tax planning- a tool to save taxes and increase income becomes instrumental when it comes to a famous saying, “A penny saved is a penny earned”. Tax planning is the analysis and arrangement of a person’s financial situation in order to maximize tax breaks and minimize tax liabilities in a legal and efficient manner. Therefore, for optimum tax saving, teachers must choose to invest in tax saving options or instruments at the very beginning which could range from Public Provident Fund (PPF), Equity Linked Saving Scheme (ELSS), Unit Linked Insurance Plan (ULIP) opening SukanyaSamridhi Account (SSA) in the name of the girl child, investing in Tax Saving Fixed Deposits, National Saving Certificates (NSS), National Pension System (NPS), Senior Citizen Savings Scheme (SCSS) and so on. All these instruments fall under SEC. 80C where the individual has the option to invest up to Rs. 1.5 lakh.
Apart from 80C, there is n number of deductions available under the Income Tax Act, 1961, such as tax deductions under Section 80D, Section 80DDB, Section 80DD, Section 80EE, Section 80EEA, Section 80G, Section 80GG, Section 80TTA, Section 80U and Section 24B. For instance, under Section 80GG, teachers can claim deductions under the House Rent Allowance (HRA) provided they are paying rent for the accommodation they are living in. In a similar vein, availing of a home loan allows you a deduction of up to Rs. 2 lakh from your taxable income under Section 24B. One of the simplest ways to avail of the deduction is under Section 80D by taking into account medical expenses spent on the routine preventive health check-up for self, spouse, dependent children and parents. For proper and efficient tax planning activity, in addition to the above tax deductions, one must take into account all the available investment options such as, investing in shares and mutual funds of specified companies and investing in infrastructure bonds. Since we cannot escape from paying taxes, what is wrong if the amount we paid as taxes is paid for social or charitable purposes or donating the same to certain specified funds like PM National Relief Fund, CM’s Earthquake Relief Fund, National Illness Assistance Fund, etc. This will not only help us in reducing tax liability but will also give us a sense of satisfaction that we were generous and the amount donated will help the people in distress. Pertinent to mention here is that a teacher by intelligent planning can bring down his taxable income below Rs. 5 lakh – a crucial threshold which makes him eligible for a full tax rebate under Section 87A. In other words, clever planning can even make a taxable income fully tax-free if it comes down to below Rs. 5 lakh.
As employees, we may not have complete control over how our salary is structured, but as teachers, and knowledge seekers, we must be clever enough to invest our salary in the best way enabling us to identify short-term and long-term financial goals. To avoid any sort of trouble in near future and to escape from tax evasion, I would suggest teaching the community not to hesitate from producing the following documents to avail of tax benefits:
 Rent receipt to claim HRA U/S 8OGG
 Medical bills to claim free medical allowance U/S 8OD
 Proof of travel to claim LTA U/S 10(5)
 Premium receipt of health/Mediclaim
 Statement of education loan in case of deduction U/S8OE
 Proof of donation to any recognised trust or charity U/S 8OG

Dr. Showket Ahmad Dar is Assistant Professor Commerce, Govt. Degree College, Tral, and can be reached at [email protected]

Dr. Showket Ahmad Dar