The urge of saving tax is triggered towards the fag end of the financial year, and the whole bunch of us frantically look for tax saving investments and tax saving options. A lot of us mismanage our taxes just by trying to get around the tax trap only towards the end of the financial year. As a result of this, not much room is ever left for prudent investment planning. Therefore it is only advisable that a smarter approach, which involves an early investment planning at the first quarters of the financial year, can mitigate your chances of making wrong investments in haste.
Several tax saving options are available for which the knowledge of tax saving expenses is essential:
Repayment of Home Loan:
Source : gethow.org
You can extract benefit from both principal and interest component of your installments. If you are paying for your first house, then a more significant amount of tax can be saved.
Repayment of Education Loan:
Source : cdn.dnaindia.com
The EMIs of the education loan is also known to bring tax benefits, Section 80E of Income Tax Act has provided for benefits on the interest paid on education loans
Medical Insurance and Health Check-up:
Source : prashanthhospitals.org
If you spend money for medical insurances or some regular health treatments, then section 80D of the Income Tax Act provides for a tax benefit which involves a deduction Rs.60,000 (make sure that the payments of premiums are not in cash).
Source : theaccountancy.co.uk
You can avail of this tax saving option with ease because retirement planning is one thing everybody is most aware of. This will drive home a good deal of tax saving since the tax is reduced once you begin to contribute to certain pension funds.
Deduction on Rent paid (without HRA): Even if you are not getting HRA in your salary, you can still have the tax benefit as provided under section 80GG of the I.T Act.
Important Tax Saving Investments:
Source : hindustantimes.com
Though not a pure form of tax saving investment but the premiums paid are deductible from the total income and thereby lowers the taxable fraction. The lump sum amount paid to the beneficiary in case of any eventuality is free from taxation. Further, if it is a pension plan then 1/3rd of the maturity amount spent, is not taxable.
Source : careerguide.com
Section 80D provides for a tax deduction on premiums you pay for health insurance plans. The upper cap is Rs.15000 and can be extended to Rs.20000 for senior citizens. Deduction of Rs.35,000 is offered on taxable income if one avails such insurance for himself or his parents. However, section 80D is not applicable for the group health insurance provided by the employer.
ELSS Mutual Funds:
Source : i2.wp.com
Equity Linked Saving Scheme is the most sought-after tax saving options as it is equity-based and boasts of the shortest lock period. The investment in ELLS can also be made through a Systematic Investment Plan where you can spend a small fraction monthly instead of the vast sum altogether.
Public Provident Fund:
Source : arthayantra.com
This is a long-term saving scheme provided by the Central Government, with the upper limit of Rs.70,000.The maturity amount received is free from any taxation.
National Pension Scheme:
Source : dexteracademy.in
The percentage of the basic salary contributed to the NPS is not taxable provided the investor abides by the 1 lakh limit.