On March 31, 2021, the Ministry of Finance released a notification on slashing the interest rates of all the Small Saving Schemes, and the same notification rolled back by the Ministry on April 1, 2021, by terming that the Order is issued by oversight! Whether it is a correction of an oversight error or a political decision, it is clear that the Government is certainly planning to slash the interest rates very shortly! And reduce the public’s dependency on Government. In Finance Bill 2020-21, the Government taxed the employer contribution to Provident Fund, NPS, and Superannuation over and above Rs. 750,000/- per annum, and the interest accrued on the amount over Rs. 750,000/- per annum. The interest accretion for the self-contribution to Provident Fund above Rs. 250,000/- made taxable from FY 2021-22.

While the small saving schemes continue to the safe and secured, they will not be the best investment option in the future, especially for the lower and middle-income groups. On the other hand, Government itself wants the public to go for the market linked savings, including National Pension Scheme-NPS. Those who hope for the higher return have to be ready to take the higher risk, otherwise, Low risk, Low Return! Unfortunately, a high-return, low-risk combination in an investment product does not exist. In reality, risk and returns are directly related, i.e. the higher the returns, the higher the risk and vice versa.

Hence, the taxpayers need to choose the right Funds/Schemes of the investment for the tax saving. Perhaps, one has to recheck whether he/she has to indeed invest to save tax, considering the amount tax benefit available on the investments, the expenses eligible for tax saving like Housing loan repayments, School Fees, Provident Fund deductions from Salary etc. Do invest, to earn wealth, not for just the short term tax saving! Think beyond the tax saving!

To summarise, investing in tax saving Fund and Schemes have to limited to the tax-saving needs!

The bible says, “The plans of the diligent lead to profit as surely as, haste leads to poverty.” (Prov 21:5) Risk and Returns are linked.

Wishing you a smooth and prosperous Financial Year and Far-sighted tax planning!

Salient features of Income-tax calculator for salaried employees F.Y. 2021-22

1. Useful for the salaried employees of government and private sector.

2. Private-sector employees can use their Flexi allocation option and link it to the tax planning.

3. Tax and rebate/deduction calculation for all types of income including agriculture income, to arrive at the annual tax liability.

4. Marginal relief on the surcharge, where income crosses the prescribed limits.

5. Automated HRA exemption/Sec 80GG deduction calculation based on the salary and rent payments.

6. Validation on the limits of Chapter VI A deduction, housing loan interest set off.

7. Best tax regime suggestion for the taxpayers.

8. Highlights of tax changes when the taxable income crosses Surcharge limits, i.e. 50 Lakh/1 Crore.

How do you select the tax regime/method?

New tax regime; tax rates are lower than the old regime. This is a better option for those who do not have tax-saving plans/investments, not paying rent or not having any housing loans, and other tax-saving payments. Please check the eligibility.

The Old tax regime can be used for all those who have tax-saving investments, pay rent, have housing loans, and so on.

Suggest you check the better option before taking a final decision on the tax method/regime. Do check which exemptions and deductions you are eligible for. Then do the calculations on whether your tax liability will be lower in the new regime or the old one.

When do you select the option? The income tax act allows you time till your Income Tax Return filing to select the Tax Regime. However, you have to communicate the regime selection to your employer to avoid higher tax deduction. You can shift from Old regime to New Regime at any time during the Financial Year. However, New Regime to Old are not allowed by many employers.

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