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A Five-Minute Guide To Saving Taxes

A Simple fact that is hard to learn is that the time to save money is when you have some. So Planning ahead for your investments is a perpetual part of your finances. The same can be true of your tax planning. Most Investors tend to delay their tax planning till the last minute. But it is essential to invest in tax saving options in time and just as essential to plan for a tax-efficient return from your investments as well, to optimize your returns. Since we are at the end of FY 2021-22 and the beginning of FY 2022-23. Let’s understand a little more about investing in tax-saving options first.

To start with, understand your tax slab and in turn how much you need to invest in tax saving options.

Next, you need to explore what type of investments or insurance can you help you save taxes –

Section 80C –

Section 80C is the most popular tax-saving option available for individuals and HUFs. Section 80C of the Income Tax Act includes various investment options with a maximum investment limit of up to 1.5 lakhs. The maximum amount of tax you can save here is up to INR 46,800**. 

  1. Contributions/Payments to EPF and PPF
    EPF PPF are government backed fixed income security plans. EPF is mandatory for most salaried employees whereas PPF is an optional investment option. For PPF, you get a floating interest rate ( current interest is 7.1%) with a lock-in period of 15 years.
  2. ELSS
    ELSS is a valuable tax-saving option available under section 80C. Being a mutual fund it is one of the easiest tax savings options with transparency and low cost. It also has the least lock period of 3 years. It is advisable to opt for the growth option here as the dividend received under dividend payout option is clubbed with your income. This means that the dividend received will be taxed as per your slab.
  3. Life Insurance Premium
    Section 80C offers deductions of up to Rs.1.5 lakh on life insurance premiums paid in a particular year. The proposer can choose life insured as self , spouse or child here to claim a deduction. Another important point to remember is that under another section – Section 10(10D) specializes in offering tax deductions on claims, i.e. death and maturity benefit, which includes all forms of accrued bonuses against the respective life insurance policies. Tax deductions under this section can be availed on all types of life insurance policy claims. There is no upper limit on the claim.
  4. Some other popular options– Principal amount payment towards home loan, stamp duty and registration charges for purchase of property, Sukanya smriddhi yojana (SSY) , National saving certificate (NSC) , Senior citizen savings scheme (SCSS), tax saving FD for 5 years etc.
  5. NPS – New Pension Scheme From FY 2017-18, this deduction limit has been increased for the self-employed individuals to 20% of the gross total income with the maximum limit being capped at Rs 1,50,000/- for a given financial year.
  6. Section 80CCD(1) – NPS – An amendment to the Section 80CCD has been introduced in the Union budget of the year 2015 as sub-section(1B). Under these new provisions, individuals can claim an additional deduction of Rs. 50,000/-. ( over and above the 1.5 lacs under 80C ) This is available to both salaried as well as self-employed individuals.

Section 80D* –

Payment of Medical Insurance Premium
As per section 80D, a taxpayer can deduct tax on premium paid towards medical insurance for self, spouse, parents and dependent children. Individuals and HUF can claim this deduction. The limit of the deduction varies with age. A deduction of Rs 25,000 is available for self, spouse, and dependent children. Additional deduction of Rs 25,000 is available for insurance paid for parents aged less than 60 years. If any insurer, i.e. self, spouse, or parents, are above 60 years of age, then the deduction of Rs 50,000 is allowed instead of Rs 25,000.

The end of FY 2021-22 is here. Check if your Tax saving is done? If not, get on it right away!. Meet with your CA and Financial Advisor and plan ahead for FY 2022-23. Happy Investing!


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