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Steps to Finalize Tax Saving Instruments

IndianMoney.com Research Team | Posted On Tuesday, January 07,2020, 05:37 PM

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Steps to Finalize Tax Saving Instruments

 

 

“Better late than never”. When we are heading towards the end of this financial year, doing tax planning would be a great step. The term tax does not give happy vibes. This is because we do not do proper tax planning. Taking the necessary steps to avoid the tax trap is essential for the proper allocation of personal funds. As we near the end of this financial year, it is high time we plan our taxes to avoid the last-minute stress.

You must monitor your tax dues. This means taking a close look at your gross income and taxable income. Your gross income minus your tax exemptions and deductions give the taxable income. Gross income on the other hand can be your salary plus other sources of income.

See Also: What is the Difference Between Tax Free Bonds and Tax Saving Bonds?

A number of investments enjoy tax deductions under the income tax act of India. Knowing these helps plan your tax dues. There are a number of investments that can save you from 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 product.

Steps to Finalize Tax Saving Instruments

Health insurance: Health insurance policies can save you from tax. Protecting your health at the same time getting a tax deduction; makes this an attractive insurance scheme. Under section 80D of the income tax act, a person below the age of 60 years can get tax deduction up to Rs 25,000 a year on premiums paid for self, spouse and dependent children. If you are above 60 years, you get tax deduction on health insurance premiums up to Rs 50,000 a year.

See Also: Income Tax Saving Tips

Now, if you are purchasing a health insurance policy for your dependent parents, you can enjoy an additional tax deduction of Rs 25,000 or 50,000 under Section 80D depending on their age. If you and your dependent parent are above 60 years, then you can get a tax deduction up to Rs 1 Lakh a year.

  • Section 80C benefit: The employee provident fund (EPF) scheme available for salaried employees can be utilized for a tax deduction as well. Your contribution enjoys a tax deduction under Section 80C of the income tax act up to Rs 1.5 Lakhs a year. The Section 80C tax benefit is a collection deduction on a number of investments which enjoy the benefit up to Rs 1.5 Lakhs a year. Popular investments which enjoy this Section 80C benefit are PPF, ELSS, SCSS, NSC or Post Office Schemes.
  • Equity linked savings schemes (ELSS): These are mutual fund schemes with the added advantage of tax saving. Under this scheme, your money will be invested in the stock market. You could enjoy high returns. ELSS offers higher returns, but at higher risk. To invest in an ELSS scheme, visit the website of your preferred fund house, pick an ELSS scheme which you think has the potential to give higher returns and make online payments. Under Section 80C of the income tax act, you can claim tax deduction up to Rs 1.5 Lakh per annum on an investment in the Equity Linked Saving Scheme. This means you can deduct the amount invested in ELSS from your total taxable income and reduce your taxes.
  • Life insurance: There are many options in life insurance to save tax. Life insurance policies are preferred by Indians to save tax as well as secure their lives. Life insurance policies enjoy tax deduction under Section 80C of the income tax act. The different types of life insurance policies are term life plans, money back policies, endowment plans and whole life plans. Death benefit is tax free.
  • 5 Year Tax Saver Bank FDs: The 5 year tax saver FD enjoys the Section 80C tax benefit. They have a lock-in of 5 years. Pre-withdrawals are not allowed. Interest Rates offered are similar to normal FDs. This is the best investment for people who are in search of fixed returns with low risk and tax benefits.

Doing your tax planning in-time is the best way to remain stress free. If this year does not go well, do not worry. April marks the beginning of the next financial year. Invest in tax saving instruments from this April and mark a new beginning.

See Also: Last Minute Tax Saving Tips

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