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Last Minute Tips to Save Tax

IndianMoney.com Research Team | Posted On Wednesday, March 04,2020, 02:46 PM

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Last Minute Tips to Save Tax

 

 

March is coming to an end. It’s time to do tax planning in a hurry. Choose tax planning investments for maximum tax efficiency. This is nothing but after tax returns of an investment.

Why tax planning? Well, if you don’t do tax planning, you end up paying more in taxes. A rupee saved in taxes is a rupee earned. Why lose all that hard earned money? Take a look at the last minute tips to save tax.

Want to know more on Tax Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

Last Minute Tips to Save Tax

What is Section 80C?

Certain investments and expenses help save tax. Section 80C is one of the great ways to save tax. This is a collective deduction on certain investments and expenses up to Rs 1.5 Lakhs. The popular investments are ELSS, PPF, 5-Year tax saver FD, NSC, SCSS among others. Home Loan principal repayment and children tuition fees also enjoys Section 80C tax benefit.

ELSS is an excellent investment for aggressive investors and those in the higher tax brackets. If you fall in the 30% tax bracket you can save Rs 46,800 a year (Rs 1.5 Lakhs * 30%) on falling in the higher tax brackets.

See Also: 6 Uncommon Ways to Save Tax

Buy a Health Insurance Plan

You must avail a health insurance plan to save tax. The premiums paid on health insurance plan for self, spouse, children and parents is tax deductible under Section 80D of the income tax act up to Rs 25,000 a year. It’s Rs 50,000 a year for senior citizens. You enjoy the twin benefits of payment for an emergency hospitalization and tax savings.

EPF Saves Tax

The Employees Provident Fund or EPF is a savings scheme under Employees’ Provident Fund and Miscellaneous Act, 1952. You (employee) contribute 12% of basic + dearness allowance. The employer contributes 8.33% towards EPS and 3.67% towards EPF. Your contribution to EPF enjoys Section 80C tax benefit up to Rs 1.5 Lakhs a year. EPF offered 8.65% for Financial Year 2018-19. There are plans to reduce this to 8.5%.

Invest in NPS

National Pension Scheme or NPS is an excellent way to save tax. The investment enjoys Section 80C tax benefit up to Rs 1.5 Lakhs a year. It also has a 50% allocation to equity which makes it a good investment for aggressive investors. You can claim an additional deduction of up to Rs 50,000 a year under Section 80CCD(1B) which is over and above the Section 80C tax benefit.

See Also: Do You Really Save with the New Income Tax Slabs?

Home Loan Saves Tax Benefits

The home loan is an excellent way to save tax. Home loan principal repayments enjoy Section 80C tax benefits up to Rs 1.5 Lakhs a year. Home loan interest repayments enjoy Section 24 tax benefits up to Rs 2 Lakhs a year. First time home buyers enjoy an additional tax benefit on home loan interest up to Rs 1.5 Lakhs a year under Section 80EEA.

  • Only individuals get the Section 80EEA tax benefit. HUFs or Companies are not eligible for this tax benefit.
  • Stamp duty of the house property must be Rs 45 Lakhs or less.
  • You must be a first-time home buyer. You must not own a residential house/property on the date of home loan sanction.

Take a joint home loan with spouse and save tax.

See Also: Steps to Finalize Tax Saving Instruments

Charity Saves Tax

Make a charity or philanthropic contribution and save tax. Some donations get a 100% tax deduction while some others enjoy a 50% tax deduction under Section 80G. Make donations to organizations specified under the Ministry of Finance and save tax.

Avoid Traps in Tax Planning

  • Chances of making mistakes are high with last-minute tax planning. Start tax planning early.
  • Always scout for tax-saving opportunities.
  • Be consistent with tax planning across the year to avoid the stress of the last-minute rush.
  • Invest in ELSS through SIPs and save tax if you are an aggressive investor.

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