“The Hardest Thing To Understand In The World Is The Income Tax”. This saying comes from one of the World’s greatest scientist, Albert Einstein himself. Today, tax is one of the most discussed topics. You have only two worries, How to earn more and how to save tax on what you earn. This is why you need tax saving ideas to save your money.
An investment in equity not only makes you rich, it saves you tax. If you are willing to take risk in your investment, then equity is the way to go. Our Country has only about 2% of the citizens, investing in equity. The Government is encouraging citizens to invest in equity mutual funds and shares. How does the Government do this….simple… It gives tax benefits if you invest in equity. You stay invested in equity mutual funds or stocks for a year or more. You then sell your equity mutual funds or stocks for a profit. This profit is called long term capital gain. You do not have to pay any tax on your long term capital gains. Imagine if the stock market shoots up and you sell your equity mutual funds or stocks just a year later, for a bumper profit. You don’t have to pay a single rupee in tax on your investment.
Talking about the Section 80 C is boring. You get tax deductions up to INR 1.5 Lakhs per year, if you invest in certain financial products. You already know all this. Have you noticed a neglected financial product called equity linked savings scheme or ELSS, which enjoys Section 80 C benefits and can save you tax? ELSS invests most of your money in equity. You cannot touch your investment for 3 years (ELSS has a 3 year lock in period). But isn’t 3 years a long time for your money to be stuck? ELSS has one of the shortest lock in, compared to other financial products which enjoy Section 80 C benefits. Equity is known to give good returns over the long term. A 3 year lock in which forces you to stay invested in equity, might not be a bad idea. ELSS also enjoys EEE benefits. The money which accumulates (grows with time) and is withdrawn at maturity, is tax free.
Buying your first home? The Union Budget 2016 brings good news. You avail a home loan to buy your dream home. You already know of the Section 24(b), where you get a tax deduction of up to INR 2 Lakhs, on the interest paid on home loan. After Union Budget 2016, you can avail an additional deduction of INR 50,000 under Section 80 EE, on the interest paid on the home loan. The amount of home loan availed should not be more than INR 35 Lakhs. The value of property/home purchased, should not be more than INR 50 Lakhs. Home loan should be sanctioned between 1st April 2016 and 31st March 2017.
Your mother and father are senior citizens. Hospitalization and medical treatment for senior citizens, can be very expensive. Avail a health insurance plan for your mother and father. You get a tax deduction of INR 30,000 a year under Section 80 D, on the premium paid for a health insurance plan, for your father and mother if they are senior citizens. You also get a tax deduction of up to INR 25,000 a year, on the premium paid for a health insurance plan, for yourself and family.
The New Pension Scheme popularly called the NPS, can be used to save tax. Invest in the NPS and avail a deduction up to INR 1.5 Lakhs a year, under Section 80 C of the income tax act. You can also avail an extra deduction of INR 50,000 under Section 80 CCD (1B), if you invest in the NPS. This benefit is over and above the INR 1.5 Lakh a year, you get under Section 80 C. Fall in the highest tax bracket of 30%? NPS is a tax avenue you must consider. On maturity of the NPS at 60 years, you have to compulsorily avail an annuity plan up to 40% of the corpus. Out of the remaining 60% of the corpus which you withdraw as a lump sum, 40% is tax free. You pay tax on the remaining 20%, depending on which income tax slab you fall under.
Tax free bonds are the favorite investment of HNI’s and the flavor of the season. What’s so special about tax free bonds? The interest you earn from tax free bonds is not taxed. If you fall in the higher tax bracket, or are an HNI (High Net worth Individual), you must invest in tax free bonds. Invest in tax free bonds which are AAA rated. Your investment is very safe and the interest you earn is not taxed. A number of film stars too prefer investing in tax free bonds. The rich earn crores of rupees and save on their taxes through tax free bonds. This is one tax saving investment you must definitely consider.
Want to save on your tax? The team of wealth doctors at IndianMoney.com is always there to help and guide you. You can explore this unique Free Advisory Service just by giving a missed call on 022 6181 6111. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products. Financial literacy is the delight we cherish!
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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