The financial year ends on March 31. Therefore, at the last minute, the taxable income is completely ripped off. With the feeling of saving as much tax as possible, a person invests money in the tax planning scheme that comes up. Fixed deposits and Public Provident Funds are another safe investment option.
Consider the options available and what you can afford to invest in. A lot of deductions come under 80C and 80D. Under 80D covers medical treatment expenses, medical insurance, while under 80C maximum tax planning can be done up to Rs 1,50,000 – 2,00,000. Investments beyond this are not deductible. That means the total tax saving is not more than 20,000. If you have a home loan, it often gives you adequate tax planning. While doing tax planning, it should be checked whether more investments can be made by combining all these.
Fixed deposits are an easy safe investment option for tax savings. Investments made in it can be withdrawn over a fixed period of time and the returns are higher than savings accounts, but less than mutual funds. Another safe investment option is Public Provident Fund. If suddenly it's time for tax planning and there is no one to guide you properly on investments, these two are the safest options.
The following options for discretionary tax planning are tax saving mutual funds, insurance policies, various government bonds, Sukanya Samriddhi Yojana, National Retirement Yojana. Do proper tax planning with the help of a tax advisor.
In the current scenario, good mutual funds are available at reasonable prices and can provide good returns in the long term. So you can consider tax saving mutual funds. If you are thinking of getting an insurance policy, the most important thing is to see if the insurance cover is adequate. Don't take insurance unless you have complete clarity about how much the premium will be and how it will be reimbursed. It includes various schemes like money back, equity linked, ULIP, endowment, retirement plan, tax saving plan. Keeping in mind the urgent tax planning in March, one should not take a new insurance policy with long installments if possible. A wrong decision can have long-lasting consequences.
One thing to remember is that insurance is not an investment but an emergency provision.
Unlike other investments, it does not generate returns. Apart from the essentials of adequate insurance coverage, health insurance, retirement provision, excess insurance will only increase your costs.
Now, let us consider what exemptions are available under which section of the Income Tax Act.
1) Under the Tax Act 1961, Section 80D provides tax relief for medical insurance premium up to Rs.25,000. The same exemption is Rs 50,000 for medical insurance premiums paid for senior citizens as well as parents.
3) Deduction of house rent can be made on the basis of Section 80 GG. If house rent allowance is not available, deduction is available under this option. For this, registered leave and license agreement and rent receipts should be kept. There are certain rules that apply to the claim amount that should be known.
4) Section 80E provides education loan deduction. Interest on loans taken for higher education can be deducted for self or spouse and children. This discount continues for eight years or until the interest is paid, whichever is earlier.
5) If a new house is purchased as per section 80EE, interest tax relief up to Rs 50 thousand is available while repaying the loan. This deduction is available on loan interest. If the home loan is less than 35 lakhs, house price is less than 50 lakhs and there is no other house, this discount is available.
The government has increased the deduction limit to Rs 1,50,000 as mentioned under the newly inserted Section 80 EEA of the Income Tax Act. It is applicable to interest paid by any person on residential property loan. This deduction is available only for individual residents and properties with a stamp value of less than Rs 45 lakh.
Thus Section 80C of the Tax Act is a very simple and useful option. Not only does the investment save tax, but the interest earned on it and the withdrawal of the principal are also tax-free. Friends, time is short. Get started right away and do tax planning by taking advantage of the legal tax benefits. At the same time, see that future investments will be made to some extent!
Expenditure on certain special diseases helps to save tax on the basis of sections 80DD and 80DDB. These include diseases like autism, cerebral palsy, cancer, AIDS, dementia, thalassemia. Expenses incurred on self, spouse, dependent children and parents are deductible. 40 thousand to half a lakh can be claimed. But, proper evidence has to be preserved.
A popular option for tax deduction among common people is under Section 80C of the Tax Act. It offers a discount of up to Rs 1,50,000. Certain options are covered under Section 80C as given below.
PPF / EPF
NSC
Mutual fund investments (like ELSS and similar approved under Section 80C)
Life insurance
Pension plans
NPS
ULIP (Unit Linked Plans)
Sukanya Samriddhi Yojana