Easy Ways to Maximize Your Tax Savings

By investing in the options stated under Section 80C, you can reduce your taxable income by up to Rs. 1.5 lacs and you end up paying no tax on it at all. This benefit allows people in the tax bracket of 30% to save tax up to Rs. 45,000 by simply investing in schemes and instruments like health insurance policies, pension plans, term plans, PPF etc.Considering all these benefits, almost every Income Tax payee tries to save tax by investing in the options under section 80C of the Income Tax Act.

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7.7 Crore

Registered Consumer

Insurance Partners

4.2 Crore

Policies Sold

Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

If you closely look through the saving options under the section 80C,you’d find that you can save tax not only by investing your saved funds in specified investment instruments but also by claiming deduction for certain expenses that you usually incur. Therefore, it is necessary to understand all the provisions under the section so as to get the maximum benefits from your tax saving efforts.

Following are some easy ways by which you can generate further tax savings:

Consider an appropriate mix of investments:

In order to avail maximum tax benefit, you must plan your investments and spread out your savings across the diverse instruments listed under Section 80 C. The section implies no sub-limits and allows you to invest regardless of your income and the tax bracket you fall under. A suitable mix of investments, along with maximizing your tax savings, will help you in meeting your financial goals. You can log on to Policybazaar.com for comparing and calculating the various channels through which you can maximize your tax savings.

Check your savings and expenses:

According to a provision under the section, if you have borrowed funds for your home and you fulfill certain conditions, then the amount you give away towards the repayment of the principal sum of your home loan is eligible for a deduction under Section 80C.

Education/tuition fee of the children:

Looking at the rising cost of education, a major chunk from the income of most parents goes towards the education fees of their child/children. To promote literacy in the nation, Government of India has allowed the school and college fee of students as a deduction under 80C. Therefore, the tuition fee you pay at your child’s school or college is also eligible for a deduction under the Income Tax Act.

Almost all the salaried income tax payers have a mandatory saving i.e. Employer Provident Fund (EPF). This deduction from your salary is made at a specified rate that ranges between 8.33 to 12%. Therefore, it is imperative to check the total amount that is deducted towards EPF during the financial year and claimed deductions for the same.

NSCs follow a cumulative scheme of interest, meaning, the interest you earn on your investment every year is reinvested in the next year. Therefore the interest becomes tax free and is also eligible for deduction under 80C. So, if you have invested in NSCs, then the accrued interest is eligible for deductions under Section 80C.

Check the Lock-In Period of the Investments

All tax saving plans have a minimum lock-in period, meaning, the period during which withdrawal of a policy is usually not allowed. If a plan is withdrawn during the lock-in period, it will be subject to the applicable tax slab in the year of withdrawal. For example, PPF (Public Provident Fund) has a lock-in period of 15 years, a National Savings Certificate has a lock-in period of 5 years, and ELSS (Equity Linked Saving Schemes)have a lock-in period of three years. Therefore, before you choose an option it is essential to evaluate it on the basis of its lock-in period and invest only if it suits your budget and requirements.

You may also like to know about Best Investment Options in India

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Past 10 Years' annualised returns as on 01-12-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).