Calculating your taxes at the eleventh hour can be an arduous task, especially for employed segment. Some advance
planning of taxes and tax saving instruments can help reduce the year-end stress to a great extent. Done properly,
one can find ways to reduce overall tax outflow. That may be incentive enough to pay attention!
Today we look at a few tried and tested instruments that can make incredible savings on taxes.
Section 80C
Under Section 80C of the Income Tax Act, you can claim deductions up to Rs 1.5 lakhs on income in a single financial
year. Investments made in the following instruments help you claim tax deduction under section 80C:
- Tax-saving Fixed Deposits: Like millions of people, tax saving FD with a lock-in of 5 years can
be your go-to tax-saving instrument - PPF: Public Provident Fund offers tax-free interest and has a lock-in period of 15 years. The
interest ranges between 7 to 8.5% at present - Life Insurance Policy: The premiums paid for insurance policies such as term life, endowment,
money-back etc. is tax-deductible. The maturity/death benefit is also tax exempt - NSC: National Saving Certificate offers a fixed rate of interest, currently around 7%, with a
lock-in - ELSS: ELSS, with a lock-in of 3 years, are market linked instruments
Saving account
Interest earned from savings accounts is tax-free up to ₹ 10,000 under Section 80TTA and the limit extends up to
50,000 for senior citizens.
Health Insurance Policy
Under Section 80D, the premium on health insurance allows you to claim tax deductions of upto ₹25,000. Also,
different amounts are exempt in different cases, depending upon the age of the insured, the number of premiums paid,
and/or the total taxable income.
National Pension System (NPS):
Under Section 80CCD of the Income Tax Act in India, one can save upto Rs 1.5 lakhs invested in the NPS account. Here,
the lock-in of is up to the retirement age.
Tax deduction on rent
Under Section 80GG, you can claim a tax deduction on your House Rent Allowance (HRA). If you are living in a rented
place and if your employer does not provide you with HRA, then you can claim a deduction of up to ₹ 60,000.
Tax deduction on Home Loan interest
Under Section 24, the interest payable on a home loan is tax-deductible up to ₹ 2,00,000. In case of let-out
property, there is no upper limit on the deduction. However, you can claim loss under the head of income from house
property, normally upto ₹ 2,00,000.
- Section 80EE: For the first-time homebuyer, Section 80EE allows you to avail tax deduction of
up to ₹50,000 on the interest paid towards home loan. This deduction is over and above the deductions provided
under section 80C and Section 24 of the Income Tax Act.
Investing your hard-earned money in a tax saving scheme can help achieve a reduction in the total taxable income
every financial year. Importantly, remember to file Form-16 provided by your employer during income tax return
submission, in order to avail of tax-exemption benefits.
Note: The Income Tax sections provided here are just for reference. It is expected that the user must acquaint with
the relevant sections to understand how tax savings are claimed.
To know more about tax management and financial instruments that can help you in the process, please write to us at
customercare@fincarebank.com or call us at 1800 313 313 Toll Free today!