‘A penny saved is a penny earned,’ as the saying goes. Tax planning can help you save on taxes and increase your income. The income tax act provides for deductions for various investments, savings, and expenditures undertaken by the taxpayer in a given year. Here are some of the options that can help you save money.
The specified sections (80C, 80D, and 80EE) are the best ways to save taxes.
Investing Rs 1.5 lakh under Sec 80C can reduce your taxable income. Investing in NPS under 80CCD(1b) can provide an additional deduction of Rs 50,000.
You can claim up to Rs 1,00,000 as a deduction on medical expenses ( Rs 50,000 for self and family if senior citizen and Rs 50,000 for senior citizen parents) under Section 80D.
Up to Rs 50,000 can be claimed as deduction on home loan interest under Section 80EE.
The provisions of Sec 80C concerning investment opportunities.
There are a range of tax-saving alternatives available to individuals and HUFs in India, all of which are listed in Section 80C of the Income Tax Act. The sum to which you may deduct is up to Rs. 1.5 lakh annually.
| Investment | Returns | Lock-in Period |
| 5-Year Bank Fixed Deposit | 6% to 7% | 5 years |
| Public Provident Fund (PPF) | 7% to 8% | 15 years |
| National Savings Certificate | 7% to 8% | 5 years |
| National Pension System (NPS) | 12% to 14% | Till Retirement |
| ELSS Funds | 15% to 18% | 3 years |
| Unit Linked Insurance Plan (ULIP) | Varies with Plan Chosen | 5 years |
| Sukanya Samriddhi Yojana (SSY) | 7.60% | N/A |
| Senior Citizen Saving Scheme (SCSS) | 7.40% | 5 years |
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In addition to Sec 80C, there are other tax saving options.
In addition to the 80C deductions, there are various deductions under Section 80 you can use to save on income tax. Tax benefits on health insurance premiums and home loan interest are a few examples.
You can claim medical insurance premium paid up to Rs 1,00,000 per year for senior citizens if you avail for senior citizens. If senior citizens are not covered under any health insurance, medical expenses incurred can be claimed under 80D up to Rs 50,000. The medical insurance premium to be claimed is Rs 50,000. (Rs 25,000 for self, spouse, and children, and Rs 25,000 for dependent parents under 60 years old).
The interest paid on a home loan can be deducted up to Rs 2 lakhs under section 24. Section 80EE allows you to claim an additional deduction of up to Rs 50,000 on home loan interest, which is in addition to the limitation imposed by section 24. The additional interest of Rs 1.5 lakh on the purchase of a new house under the affordable housing scheme according to section 80EEA is extended until March 31, 2022.
You can claim a deduction of up to Rs 2 lakhs under section 24 for interest paid on a home loan. In addition to the limit set by section 24, you may claim a deduction of up to Rs 50,000 for home loan interest under section 80EE. Until March 31, 2022, the additional interest of Rs 1.5 lakh associated with purchasing a new home under the affordable housing scheme is allowed pursuant to section 80EEA.
Having a home loan can help you reduce your taxable income, as the principal portion can be claimed under Section 80C up to Rs 1.5 lakh, and the interest portion can be deducted from income from house property.
Section 80E allows for the deduction of interest paid on an education loan.
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The best way to save on taxes is to invest wisely.
Planning for tax-saving investments should begin at the beginning of the fiscal year.
Many taxpayers wait until the final quarter of the year to make their investments, which results in hurried decisions. By planning at the beginning of the year, your investments may compound and help you reach long-term objectives. Remember, tax-saving should be considered an extra benefit rather than an objective in itself.
The following pointers can help you plan for tax savings:
You should already check the tax-saving expenses you have – such as insurance premiums, children’s tuition fees, EPF contributions, and home loan repayments, for example.
To figure out how much to invest, deduct this amount from Rs 1.5 lakh. You do not have to invest the entire amount if expenses are already covering the limit.
When choosing tax-saving investments, take into account your risk profile and goals. ELSS funds, PPF, NPS, and fixed deposits are just a few of the common ones.
You can find out how to exhaust the 80C limit using this method. It is best to begin investing in the first quarter of the fiscal year so that you can spread out your investments over the year. Investing this way won’t burden you at the end of the year and will allow you to make more knowledgeable choices.
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Frequently Asked Questions about Tax Saving?
What is Income tax?
The Income Tax Act of 1961 requires the central government to collect this tax on the incomes of its citizens. In addition to salary, income can include a variety of things. Every year, the government may alter the income brackets and tax rates in its Union Budget.
What is income tax with example?
An income tax is a tax on the earnings of companies and individuals. Income taxes are levied on a person’s or company’s earnings, which can be derived from a variety of sources, including wages, salaries, dividends, interest, royalties, rents, gambling winnings, and product sales.
Who will Pay Income tax?
Any Indian citizen aged below 60 years who earns more than Rs. 2.5 million is subject to income tax. Individuals who are above 60 years of age and earn more than Rs. 3 million must pay taxes to the Indian government.
How To Save Income Tax?
You can find a number of low-cost life insurance policies that provide a variety of benefits to meet your monetary demands. You may reduce your taxable income under Section 80(C) and Section 10(10D) of the Indian Income Tax Act, 1961 by purchasing a term policy. We will examine this section in detail.
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