How to start tax saving from now

It’s almost the end of financial year 2016-17, and many of us would be looking for the various tax saving options. So if you haven’t still done anything for tax saving, it’s the time to start doing it.

Because effective tax planning can help you save a lot of tax. In this article, we will discuss with you various investment options that can reduce your tax outgo. Let us take a look at them:

Take health insurance plan

It is one of the best and the easy way of saving the tax. Premium paid for the health insurance for yourself, spouse, and dependent children is allowed to be deducted from your income up to Rs 25,000. If you take the health insurance for your parents, additional Rs 25,000 are allowed as deduction from your income. So it means you can claim deduction of around Rs 50,000 easily. The deduction of Rs 25,000 will increase to Rs 30,000 if person for whom health insurance is taken is senior citizen.

Investments U/s 80C

Investment made in any of the following will reduce your income by maximum up to Rs 1.5 lakh
A: Equity Linked Saving Scheme (ELSS): It is a diversified mutual fund scheme, and has lock in period of three years. ELSS invests in share market and has the potential to earn high returns.

B: Tax saving fixed deposit: It is like any other fixed deposit in the bank but it has the lock in period of five years.

C: Deposit in PPF account: PPF is also a long-term saving scheme by the government.

Anyone can open PPF in SBI, Post office or other banks. The interest from PPF and proceeds from maturity both are exempt from tax but it has a lock in period of 15 years.

D: Sukanya Samriddhi Account: This is a government saving scheme for the girl child. The investment is locked till your girl child turns 18. The amount received on maturity is tax free.

E: Senior Citizen Saving Scheme: It is a saving scheme by the government for senior citizens. This scheme gives regular income to senior citizens.

F: National Saving Certificate (NSC): It is a post office small saving scheme. It is issued for five years. Apart from the investments mentioned in (a) to (f) certain expenses are also covered under Sec 80C limit of Rs 1.5 lakh and thereby will reduce your income.

Tuition fees: Tuition fees paid to any school, college, university or educational institute situated in India for the education of children is allowed as deduction from the income but for maximum up to two children.

Life insurance premium: The annual premium paid for life insurance for self, spouse or children is also deductible from income.

Repayment of home loan principal: The repayment of the principal of a loan taken to buy or construct a residential property is also eligible for the deduction.

Contribution to PF: The contribution to PF by the employer is tax exempt while the employee’s contribution is deductible from the income.

These expenses and above mentioned investments from (a) to (f) in aggregate should not exceed the limit of Rs 1.5 lakh.

Invest in NPS

NPS (National Pension Scheme) is a voluntary pension scheme which is regulated by the Pension Fund Regulatory and Development Authority. Investment in NPS gives you the deduction of Rs 50,000 under sec 80CCD (1b) in addition to the overall limit of Rs 1.5 lakh under sec 80C. In other words, the combined benefit of 80C + 80CCD (1b) is Rs 2 lakh which can be availed. However, withdrawals from NPS are not allowed up to age of 60 years. Only in few cases withdrawal is allowed after 10 years subject to conditions. So investing in NPS is beneficial only if you have surplus funds.

Giving away money for charity

You can save tax on donations . However, not every charity gives you 100% tax saving. Donations to the PM relief fund, some notified NGO and political parties can give you 100% tax benefit. Donation can also be made to scientific institutions and religious body. But the donation should not be made in cash for amount above Rs 10,000.

Tax benefit on home loan interest Payment

If you are paying the home loan interest, it can give you a big tax saving. The payment of home loan interest up to Rs 2 lakh is allowed as deduction from your income.

The loan must be taken for the purchase or construction of new property and the construction of the house should be completed within five years.
Otherwise only Rs 30,000 is allowed as deduction.

Source : DH/27.2.2017

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