Tax Planning: Best Tax Saving Options For Salaried Employees
As this financial year is close to its end, one thing that comes to every individual’s mind is the phrase ‘Tax Liability’. On the other hand, given a choice, most of us wouldn’t even want to pay tax on the income we earn. But we should. As citizens of India, it is our rightful duty to pay taxes as we are also consumers of the country’s public infrastructure and facilities, and income tax is an important source of revenue for the government. So, it is our responsibility to contribute towards building and maintaining the public infrastructure. Paying income tax and filing income tax returns on time ensure that.
However, this amount of tax levy payable often consumes a large chunk of our disposable income but if we are smart enough we could save huge amounts of the same. Since, such amount of taxes paid are often high it is sensible to plan it before-hand.
According to the Income Tax Act, 1962 you can make certain investments and expenses which are in turn deducted from your taxable income.
Following is the list of ways how you can actually save tax by spending smartly:
- Making an investment under Sec 80C (Limited to Rs 1.5 lakh) to reduce your taxable income
- Buy Medical Insurance & claim a deduction up to Rs. 25,000 (Rs 50,000 for Senior Citizens) for medical insurance premium under Section 80D
- Invest in various funds such as the ELSS funds, National Pension System (NPS), 5-Year Bank Fixed Deposit, Public Provident Fund (PPF) and National Savings Certificate
- Claim deduction up to Rs 50,000 on Home Loan Interest under Section 80EE
What are the Investment Options under Sec 80C?
Section 80C of the Income Tax Act, 1962 is one of the most sought after sections as it grants deduction of various expenses. It provides many tax-saving options available mainly to individuals and HUFs in India. However, this deduction is limited up to Rs. 1.5 Lakh.
This section includes deductions payments made in regards to:
- Life Insurance
- Sukanya Samriddhi Yojana
- Home Loan Principal Repayment
- Investments made toward long-term government-approved infrastructure bonds.
- Investments made under a government-approved equity savings scheme.
- Payment of tuition fees
- Contribution towards gratuity and EPF
Other Tax Savings options beyond Sec 80C
You might be surprised to know that alongside deductions in the amazing section of 80C, there are various other deductions which you can claim under Section 80 to save on income tax.
Following is the list of a few such:
- Expenditure on Medical Insurance & claim a deduction up to Rs. 25,000 (Rs 50,000 for Senior Citizens) for medical insurance premium
- Deduction up to Rs 50,000 on home loan interest under Section 80EE
- Payment of home loan and related interest.