Tax planning is a crucial aspect of financial management. With the March 31 deadline approaching, Investing in tax-saving vehicles in a planned manner can lower your taxable income and secure your future. Here’s a simple guide to help you save tax effectively.
1. Utilize Section 80C: Invest Up to ₹1.5 Lakh
Under Section 80C of the Income Tax Act, individuals can claim up to ₹1.5 lakh deductions per financial year by investing in eligible schemes. Some of the popular options include:
- Public Provident Fund (PPF): A long-term savings scheme with tax-free returns.
- Employee Provident Fund (EPF): Mandatory for salaried employees, with contributions eligible for deductions.
- Equity-Linked Savings Scheme (ELSS): A market-linked investment with a lock-in of three years.
- Life Insurance Premiums: Premiums paid for life insurance policies qualify for tax benefits.
- National Savings Certificate (NSC): A safe investment with a fixed return and tax benefits.
- Sukanya Samriddhi Yojana (SSY): A savings scheme designed for a girl child with tax-free maturity proceeds.
- Tuition Fees: Tuition fees paid for children’s education also qualify for tax deduction.
2. National Pension System (NPS) – Extra ₹50,000 Deduction
Apart from the ₹1.5 lakh under 80C, an additional deduction of ₹50,000 is available under Section 80CCD(1B) for investments in the National Pension System (NPS). This makes NPS a great tool for both retirement savings and tax benefits.
3. Health Insurance and Medical Expenses – Section 80D
Investing in health insurance not only provides financial security in case of medical emergencies but also offers tax benefits:
- Self & Family: Premiums paid for self, spouse, and children qualify for a deduction of up to ₹25,000.
- Senior Citizen Parents: If you pay for parents aged 60 and above, an additional deduction of ₹50,000 is allowed.
- Preventive Health Check-ups: Expenses up to ₹5,000 can be claimed as part of the overall 80D limit.
Also Read: New Income Tax Bill 2025: What It Means for Crypto Investors
4. Home Loan Benefits
If you have a home loan, you can claim deductions under the following sections:
- Section 80C: Deduction of up to ₹1.5 lakh on principal repayment.
- Section 24(b): Deduction of up to ₹2 lakh on interest paid on a home loan.
- Section 80EEA: Additional deduction of ₹1.5 lakh for first-time home buyers on interest paid.
5. Education Loan – Section 80E
Interest paid on education loans is deductible under Section 80E, with no upper limit. This is valid for a maximum of 8 years or until the interest is fully repaid, whichever is earlier.
6. Donations – Section 80G
Donations to charitable institutions are tax-deductible under Section 80G. The deduction rate is based on the nature of charity (50% or 100% of the donation).
7. Tax-Saving Fixed Deposits
Investments in tax-saving fixed deposits (FDs) with a 5-year lock-in are eligible for deductions under Section 80C, but the interest earned is taxable.
8. Senior Citizens’ Benefits – Section 80TTB
Senior citizens (aged 60 and above) can claim a deduction of up to ₹50,000 on interest income earned from bank deposits, post office savings, or fixed deposits.
Plan Well, Save More
Tax-saving investments should be coordinated to your needs. Rather than finding deductions only, look at investment opportunities that will provide security, growth, and liquidity according to your requirement. Planning well in advance will make you benefit to the fullest through tax savings as well as making your future secure.
Using these tax-saving paths, one can save tax by a big percentage and get their finances secured.
Also Read: New Income Tax Bill Introduced in Lok Sabha
