Constantly monitoring and keeping oneself updated regarding the changing laws and customs is the secret to managing the finances better. The investors are always on the lookout to gain maximum profit with minimum tax liabilities. Therefore, keeping up to date regarding the latest tax schemes will prove to be of great help in this respect.
Tax-saving Schemes under Section 80C and 80D of Income Tax Act
The Sections 80C and 80D are the two sections of the Income Tax Act that contribute maximum in respect of tax–saving. There are certain tricks that if taken into careful consideration will do well in saving taxes.
- Investing up to INR 1.5 lakh under Section 80C will reduce the load of taxable income
- Section 80D covers tax benefit up to INR 25,000 for general investors and INR 50,000 for senior citizens while investing in health insurance
- Another helpful suggestion in this respect is the tax deduction claim up to INR 50,000 in case of home loan interest
Insurance
Life insurance plans like term life insurance, ulips, savings, child plan are the safest ways to save taxes as you can avail tax deductions under section 80C for the premium amount paid towards the life insurance.
ELSS investment
ELSS investments offer tax deduction under Section 80C of the Income Tax Act. It offers the minimum lock-in period of just 3 years, with the option to choose an investment on a monthly basis. It even offers higher rates of interest when compared to PPF or FD.
Investment schemes under Section 80C
Some of the most well-known and popular tax-saving schemes that can be availed by the HUFs and the Indian individuals come under the purview of Section 80C of the Income Tax Act. There are several types of schemes that offer tax benefits up to INR 1.5 lakh in a single financial year.
| Investment | Returns | Lock-in Period |
| 5-Year Bank Fixed Deposit | 6%-7% | 5 years |
| Public Provident Fund | 7%-8% | 15 years |
| National Savings Certificate | 7%-8% | 5 years |
| National Pension Scheme | 12%-14% | Till retirement |
| ELSS Funds | 15%-18% | 3 years |
Tax-saving Opportunities beyond Section 80C
Section 80 of the Income Tax Act offers multiple tax-saving benefits to the investors. Careful consideration in this respect can save a considerable amount of tax burden.
- Investing in health insurance policy offers the investor a tax deduction of up to INR 25,000 for the general investors and up to INR 50,000 for the senior citizens
- Section 80EE offers tax deduction claim up to INR 50,000 on home loan interest
- Home loan generates a number of tax-saving benefits that considerably lowers the tax load. The major amount of the home loan enjoys tax deduction up to INR 1.5 lakh under Section 80C. Apart from this, the interest is eligible to offer a tax deduction under Section 24 of the Income Tax Act under the house property lead.
Planning Tax-saving Investments for a Particular Financial Year
Financial experts opine that the best time to plan tax-saving investment is at the start of a financial year. It is the general trend of the investors to hold the planning up until the last quarter, leading to improper planning because of time constraints. On the other hand, if the investment is planned at the beginning of the year, the compound factor will work in the favour of the investor leading to positive effects in the long run. One thing must be kept in mind that tax-saving should not be the ultimate goal; rather, it must be treated as an additional perk.
Availing Tax Benefits
- Ideally, the investor must consider the tax-saving expenses already undertaken. Such factors include children’s tuition fees, insurance premiums, home loan repayment, EPF contribution and so on.
- The difference between these costs and INR 1.5 lakh will show the net amount to be invested. If the expenses are enough to cover the limit, then there is no need to invest the full amount.
- Based on the risk appetite and financial targets, the tax-saving investment schemes need to be chosen for availing the maximum benefit. Some of the most popular options in this regard include PPF, NPS, ELSS funds and of course the conventional fixed deposit schemes.
This is how the investor will receive a coherent picture of the funds and avail the maximum tax deduction benefit under Section 80C. Ideally, the first quarter of any financial year is suitable to plan tax-saving investments for optimum benefits. Therefore, there will be ample resources to spread into several other schemes in an organized manner for best utilization and returns. This practice will help in the long-run without causing any burden at the end.