Things You Need to Know About Saving Income Tax
Be Tax wise and Save your Income
You can Make investment of Rs 1.5 lakh under Sec 80C to reduce your taxable income.
You can Buy Medical Insurance & claim a deduction up to Rs. 25,000 (Rs 50,000 for Senior Citizens) for medical insurance premium under Section 80D.
You can Claim deduction upto Rs 50,000 on Home Loan Interest under Section 80EE.
Right now most popular tax-saving options available in india for individuals and HUFs are under Section 80C of the Income Tax Act. Because Section 80C includes various investments and expenses where you can claim deductions on – up to the limit of Rs. 1.5 lakh in a financial year.
| Investment | Expected Returns |
|---|---|
| 5-Year Bank Fixed Deposit | 6% to 7% |
| Public Provident Fund (PPF) | 7% to 8% |
| National Savings Certificate | 7% to 8% |
| National Pension System (NPS) | 12% to 14% |
| ELSS Funds | 15% to 18% |
You can Buy Medical Insurance & claim a deduction up to Rs. 25,000 (Rs 50,000 for Senior Citizens) for medical insurance premium
You can Claim deduction upto Rs 50,000 on home loan interest under Section 80EE
For working profession A home loan would also help you in reducing your taxable income as the principal portion of home loan can be claimed under Section 80C upto Rs 1.5 lakh and the interest portion can be claimed as a deduction from income from house property
The best time to start planning your tax-saving investments is at the beginning of the financial year. Most taxpayers procrastinate till the last quarter of the year, resulting in hurried decisions. Instead, if you plan at the start of the year, your investments can compound and help you achieve long-term goals. Remember, tax-saving should be an additional perk and not a goal in itself.
You can Use the following points which will help to plan your tax-saving for the year:
You should Check the tax-saving expenses you already have – like insurance premiums, children’s tuition fees, EPF contribution, home loan repayment etc.
You should Deduct this amount from Rs 1.5 lakh to figure out how much to invest. You needn’t invest the entire amount, if expenses are covering the limit
You can Choose tax-saving investments based on your goals and risk profile. ELSS funds, PPF, NPS and fixed deposits are some of the popular options.
Investment in a Public Provident Fund, commonly known as PPF, is the best option to save tax u/c 80C. It is most suitable for the ones who want to save funds for their retirement. It offers to provide the return on par with the inflation mostly. PPF allows contribution to a limit of Rs. 150000, which can be done by small investments or lump-sum.
It is amongst of the best tax saving schemes under section 80C of the Income Tax Act, 1961. It is similar to the fixed deposits, having a 5years lock-in period. The amount invested cannot be withdrawn in between. Higher interest rate compared to the regular FDs is provided. The interest earned at the end of 5years is fully taxable.
NSC is a safe investment option. It is issued by the Post Offices. The Government of India looks after the interest and the principal amount. The NSCs are available for five and ten years. There is no limit for investment. Investments are made in the multiples of 1000, 5000 or 10000. Minimum of Rs. 500 is required. The interest rate is fixed every year.
Section 80C provides the deduction for investment in ULIP also. It is a combination of investment and insurance which is eligible for tax exemption. It covers the risk but no guaranteed returns. Depending upon the scheme the returns can range from 5% to 11%. The maturity revenues earned are tax-free.
They are mutual funds which are linked to equity. The investment is made in equity, aiming for higher returns of about 15% in the long term. There is no guarantee for such returns but the study shows that they are achievable. It offers the lowest lock-in period of just three years. Dividend option can be taken to enjoy regular return during the lock-in period.
Life Insurance can be regarded as a default tax saving scheme used by the investors. It is covered under section 80C. The schemes of life insurance help a person to protect itself and its dependents from any risk in the future. Although the tax benefit can be reversed if anyone gives up the plan before two years.
The contributions can be claimed as a deduction under section 80C of the Act. Low-cost investment options are available. The returns are also fluctuating 3% to 10%. It is not such an attractive and recommendable scheme due to its restrictions. The withdrawals are taxable along with maturity amount. The funds can be accessed only after retirement.
SCSS is for the senior citizens to save tax. The people who are above 60 years of age can make an investment in this scheme.The interest is taxable, but it is mostly covered in the taxable limit. The maximum limit for investment is Rs. 15lakhs. There is a lock-in period of 5years also. The Government backs up the principal amount of investment.
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