Beyond the Basics: Advanced Strategies for TDS Optimisation

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Making Advance Tax Payment is every citizen’s responsibility that helps the government fund its growth objectives. Regardless of your income, you must submit an ITR and pay taxes regularly if your income is above a threshold limit.

However, do you know that with advanced strategies for TDS optimisation, you can significantly reduce your tax obligations and benefit from tax exemptions on various investments? Tax optimisation includes analysing your financial strategy and situation to minimise the amount of payable taxes. 

Through this guide, beyond the basics, you will learn how advanced strategies for TDS optimisation help save money. 

  • Utilise Section 80C to the Max

Section 80C is the most important aspect of the Income Tax Act for TDS optimisation. With several exemptions under this section, tax planning becomes a simple affair. The government offers several tax exemptions for various tax-saving instruments under the section to encourage saving among citizens. They will reduce your worries about spending high amounts on taxes and help you save simultaneously. Some instruments under the section include PPF, NSC, life insurance, home loans, education loans, etc.

  • Use ELSS as a Tax-Saving Instrument

Investments in the Equity-Linked Savings Plans or ELSS can help you save tax on the profits earned. You can receive a tax exemption of up to Rs. 1.5 Lakh per year through ELSS investments. ELSS is an equity-oriented plan that allocates most of its funds in stocks. However, since the returns depend on market performance, diversifying the assets across various stocks is a good strategy to minimise the risks.

  • Retirement Planning with NPS

The NPS, or National Pension System, is a retirement-saving plan administered by the Pension Regulatory Fund Authority of India (PFRDA). It mainly invests money in debt and equity instruments, and the maturity value depends on the asset class’s performance. Upon retirement, you can withdraw 60% of the accumulated corpus as a lump sum and invest 40% in an annuity that delivers a pension during your golden years. NPS investors are also eligible for a tax exemption of up to Rs. 2 Lakh under different sections of the Income Tax Act.

  • ULIP Investments Go a Long Way for TDS Optimisation

ULIPs provide the benefits of investments and provide life insurance at the same time. Since life insurance companies provide ULIPs, the payments made towards them are termed “premiums”. They divide your premiums into investment and mutual fund components based on whether you need debt, stock, or hybrid types of funds. Fund administrators look after these investments, and you can switch between funds to maximise the benefits. Additionally, you can also claim a tax benefit of up to Rs. 1.5 Lakh under Sections 80C and 80CCC per year. 

  • Provide Rental Proofs

You can claim a tax break on your rent payments under Section 80GG if you live on rent. However, one condition is that your salary breakup should not include the HRA component. If your employer provides an HRA in the TDS online payment, the tax exemption will be on the lowest amount for the actual HRA after deducting your basic pay. 

  • Buy Health Insurance

Under Section 80D, you can claim a tax deduction of up to Rs. 25,000 for purchasing health insurance for yourself, your spouse, and your dependent children. The tax break increases to Rs. 50,000 if you pay insurance premiums for your senior citizen parents. Besides tax benefits, buying health insurance also provides medical coverage and minimises the impact of sudden medical treatments.

  • Take a Home Loan or Education Loan

If you plan to purchase a house, you can take a home loan and claim a tax deduction on the interest and principal payments. Section 24 provides a tax break of up to Rs. 2 lakh for self-occupied properties. Additionally, Section 80C provides a tax exemption of up to Rs. 1.5 Lakh on the principal repayment. Similarly, if you take an education loan, you can claim a tax benefit under Section 80E for eight years without any financial cap.

  • Claim Tax Refunds for Certain Illnesses and Medical Treatments 

Section 80DDB provides tax benefits of up to Rs. 40,000 for certain illnesses like cancer, thalassemia, and renal failure. This deduction is higher up to Rs. 1 Lakh for senior citizens.

  • Donate

Donate to relief funds and charities to reduce your tax outflow. Under Section 80G, you can claim tax deductions from 50% to 100% based on the charity organisation. Section 80GGC also provides deductions on donations to political parties.

Starting your TDS optimisation early is essential to maximise your savings. It will give you more time to estimate your revenue and plan your investments according to the desired gains and tax benefits.

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