With the end of the financial year nearing, one question on every tax-paying citizen’s mind is ‘How can I save income tax?’ As the income increases, so do our worries about investing in the correct instruments and investing enough, so that we don’t end up paying too much in taxes.
Tax saving isn’t rocket science. If you know where to invest and what will provide maximum tax benefit, you can make the most of your investments. Below are some tips on how to save income tax in India.
1. Invest up to 1.5 Lakh under Section 80C:
When you invest in any of the options listed below, you can claim a tax deduction of up to Rs. 1.5 Lakh under Section 80C of The Income Tax Act, 1961.
- Tax Saving Fixed Deposits: These give you the dual benefit of tax exemption and high rate of returns. Tax Saving Fixed Deposits are ideal for those who want to invest their money in low-risk instruments. To open a Tax Saving Fixed Deposits with RBL Bank, click here.
- PPF (Public Provident Fund): PPF is a government established savings scheme with a maximum duration of 15 years. The interest earned on PPF is tax-free.
- ELSS Funds: These are the type of mutual funds that invest 80% of your money in equity shares. The lock-in period of ELSS funds is 3 years.
- NSC (National Saving Certificate): NSC has a tenure of 5 years and a fixed rate of interest. The interest you earn on your NSC investment falls under the limit of Rs. 1.5 lakh under Section 80C limit. You can claim tax deductions on this investment if no other investments are using up the limit.
- Life Insurance Premiums: If you have Life Insurance Policies towards which you pay regular premiums, you can use them to claim tax deductions.
- Home Loan Repayment: If you have taken a home loan and are paying premiums towards its repayment, the principal amount on your home loan is tax deductible up to Rs. 1.5 lakh per annum.
- Payment of tuition fees: If you are paying tuition fees for yourself, your spouse or children, you can you can use them to claim tax deductions.
- EPF (Employee Provident Fund): Under the EPF Act, 12% of the employee’s salary goes towards the Employees Provident Fund investment. This deduction is also counted towards the Rs. 1.5 lakh investment limit under Section 80C.
- Senior Citizens Savings Scheme: If you invest in SCSS, you can claim tax deductions under this. The maximum tenure of a SCSS is 5 years and it is available to those above 60 years of age.
- Sukanya Samriddhi Yojana: Parents with a girl child below the age of 10 can claim a deduction under this investment. Under this scheme, the investment holds for 21 years or until the girl marries after turning 18. The interest earned in this investment is tax free.
2. Pay Health Insurance Premiums:
Under Section 80D, you can claim a tax deduction up to Rs. 25,000 for health insurance premiums you pay per year.
3. Tax deduction on house rent:
If you are a salaried individual who gets HRA (House Rent Allowance), you can claim a tax deduction on that amount. If you do not get HRA but pay rent, you can claim a deduction up to Rs. 60,000 per year, under Section 80GG of the Income Tax Act.
4. Tax Deduction on Home Loan interest:
If you’ve taken a home loan, the interest you pay towards the repayment of that loan is tax-deductible.
5. Contribute to charity:
Charitable donations are tax-deductible. There is no upper limit, but it is best to read up about the rules restricting tax deduction amount on charitable donations.
With these tax saving investment tips and tricks, you can invest your wealth wisely and save significantly on your Income Tax. Ensure that you plan your finances and explore a wide variety of saving instruments before filing for your Income Tax Returns. Happy saving!