Paying Income tax at the end of financial years becomes challenging for most of the people. Most of the hassle bustle is based on the submission of various insurances and rent receipt. But if you want to save on taxes and safe yourself from unnecessary financial stress than it is important to check out all the instruments for tax-saving.
In order to know that how much you can actually save on taxes it is important to understand the slabs. Based on the annual income of an individual, the tax payers are categorized in income tax slab. So, if you are really looking for a way to save on taxes, which eventually everyone does then you can either, invest your finance in markets and insurance or put them in saving instruments for future. Moreover, you can also use the different allowances to save your taxes. Below we have given some insight on ways to save taxes.
Buying insurance policies have many benefits but one of its major benefits is that it helps you to save on taxes. Let us discuss how insurance helps one save income tax.
Life Insurance: Life insurance policies not only provide life coverage to an individual but are also an excellent way to save on taxes. In life insurance policy one need pay premiums every year which in return is paid back in large lump-sum amount in case of demise of the insured person. The premium paid for life insurance policies are liable of tax deduction under section 80C of Income Tax Act.
ULIPs: Unit Linked Insurance Plan are insurance plans are market linked plan. Under this plan the investors are offered the benefit of both investment and protection under single plan. Financial investments done under this scheme are also eligible for tax deduction plus it also provides an opportunity to help your money grow.
Heath Insurance: As the cost of medical treatment and medical care is accelerating rapidly; buying a health insurance policy has much become a necessity. Health insurance policies ensured that you have enough finances to take care of your medical expenses. If you pay premiums for your health insurance, then you can save your taxes up to Rs15,000 to Rs20,000.
Investments are financial instruments where you invest today and reap benefits later. Besides this, investments also help you to save on taxes. Some of the common investment options are-
Mutual Funds: Equity Linked saving schemes (ELSS) can be used to gain tax benefit. ELSS comes with a lock-in period of 3 years. The lock-in period of mutual fund is less as compared to fixed deposit and PPF’s. One of the major benefits of this scheme is that it offers a huge return on investment.
Tax Saving Fixed Deposit: Fixed deposit offered by different banks is used as a tax saving instruments. One can put an amount Rs1lakh to Rs1.5lakh in these deposits and can gain an attractive interest along with the benefit of tax saving for that year. The fixed deposit comes with a lock in period of 5 years.
Post Office Time Deposit- Post office time deposit is same as fixed deposit provided that the person has no limits on how much amount he/she can put in it. The minimum amount that is required to put in post office time deposit is Rs200 and has a compelling interest rate as 8.5% per annum. With a lock in period of 5 years an individual can avail tax benefit under section 80C of Income Tax Act.
National Saving Certificates- National Saving Certificate can be availed from the post office. One just need to do a minimum investment of Rs100. NSC comes with a lock in period of 5 years and 10 years and the investments made in NSC’s are eligible for tax exemption.
Provident Funds: Provident Funds also known as Pension Fund as they are created with a goal of long term return. Deposits made in provident fund are eligible for tax deduction under section 80C of Income Tax Act.
Home Loans for Construction or Buying a House: Home loans are also an effective way to save taxes. The principal and interest paid each year up to Rs1,00,000 are eligible for tax benefit under section 80C and Rs1.5 lakh for the interest under section 24 of Income Tax Act.
Home Loan for Renovation
While many people know about the advantage of declaring home loan for tax exemption, very less people knows that home loan taken for reconstruction and renovation is also eligible for tax deduction.
|You may like to Read: How to efile Income Tax|
Other Tax Saving Instruments-
Some Additional Tips to Save on Taxes-
1. The interest paid on education loan in the country comes under the section 80E of the tax deduction.
2. Under section 80RRB, the tax deduction is applicable on the income earned by way of royalties and patents. For the patent registered under the patent act,1970 up to the amount of Rs3,00,000 income tax can be saved.
3. Under section 80U of Income Tax Act, tax deduction is applicable for disable people. To avail the tax benefit under this section one need to show their disability certificate. Depending on the severity of disability up to Rs1,00,000 can be non-taxed.
By choosing the most suitable tax saving investment plans in your agenda you are save a lot and can ultimately achieve your financial goal at the end of the year.