Tax planning is always a major concern for salaried and business person every financial year. Everyone wants to save as much as possible his hard-earned money. You must be wondering how to save tax and reduce your taxable income within limited possibilities.
You just need to plan properly and make wise selection of investment throughout a financial year to avail the maximum tax deduction benefit over your income. Learn and know how to save tax within limited available tax saving options.
Tax Saving up to ₹1lakh and 50 thousand within Section 80C, 80CCC and 80CCD
You can save maximum ₹1lakh and 50 thousand within the provision of these 3 sections of IT Act of India. Government of India encourages saving of money by allowing these tax deduction provision for common people. You may invest the entire capping amount of ₹1lakh and 50 thousand in any one of these sections or in all three of them to avail this tax deduction opportunity.
Tax Saving Instruments
Here are the devices through which you can save tax under the above mentioned sections of Indian IT Act:
Public Provident Fund
PPF accounts are the most admired option for tax saving under Sec.80C of IT Act. The EEE status of Public Provident Fund allows you to avail tax deduction on the sum invested and also the sum you receive at maturity of the account. PPF comes with a lock-in time of 15yrs. The minimum investment amount could be ₹5hundred and maximum amount is ₹1lakh and 50 thousand in a financial year.
National Savings /Certificate
NSCs are another public sector highly secured investment option for salaried and business people. Again, you can save up to ₹1lakh and 50 thousand in a financial year in National Savings Certificate for a lock-in period of 5yrs at modest rate of interest (7.6%).
Employees’ Provident Fund
The amount of money deducted from your salary as EPF is also eligible for tax deduction under Sec.80C up to ₹1lakh and 50 thousand. However the rate of interest offered by EPF is quite better i.e. 8.8%.
Equity Linked Savings Scheme
You may consider investing your money in ELSS which has a lock-in period of 3yrs and has great tax benefit opportunity. The equity oriented schemes offer you better returns but with certain risk factors.
Tax Saving Fixed Deposit Schemes
These FD schemes are relatively easy to handle because you can have your tax saving FD account right at your savings bank. Tax saving FDs come in with 5yrs lock-in time with modest interest rates, rates vary at different banks. You can save tax maximum up to ₹1lakh and 50 thousand with bank FDs.
Life Insurance Policies
You may also opt to invest in life insurance plans to avail tax benefit within Sec.80C along with life coverage facility and death and maturity benefits.
You are eligible to avail tax benefit in case you have to repay your home loan amount under Sec.80C. Besides, you can claim tax deduction on the interest paid for home loan under Sec.24 without limts.
Apart from the above tax saving devices, you may also avail an additional deduction of ₹50 thousand under Sec.80CCD for contributing in National Pension Scheme.
How to Save Tax under Sec 80 D, Sec.80DD, Sec.80DDB
Check out how to save tax within these sections of IT Act when you are liable to pay medical expenses of your family.
Save Tax under Section 80D
|Persons Covered||Exemption Capping (in ₹)||Total Exemption|
|Self and Family||25 thousand||25 thousand|
|Self & Family + Parents||25 thousand + 25 thousand||50 thousand|
|Self & Family + Senior Parents||25 thousand + 50 thousand||75 thousand|
|Senior Self & Family + Senior Parents||50 thousand + 50 thousand||1 Lakh|
Save Tax under Section 80DD
Government of India allows special tax deduction provision for people with partial and complete disabilities.
- ₹75 thousand tax deduction is allowed for people with 40 percent or more disability.
- ₹1lkah and 25 thousand tax deduction is allowed to people with severe disability.
Save Tax under Section 80DDB
Government of India also permits deduction up to ₹40 thousand to people suffering with specified diseases. However, if you are liable to pay the medical expenses of senior or super senior (80 and above) people suffering with specified diseases, this deduction will be ₹1lakh.
Save Tax under Section 80E
You may claim for tax deduction if you are liable to repay a loan taken for yourself, spouse or children under Sec.80E.
Save Tax under Section 80CCG
If your annual salary income is less that ₹12 lakhs then you may invest in shares belonging to Rajiv Gandhi Equity Savings Scheme to avail further tax deduction of ₹50 thousand.
Save Tax through Donation under Section 80G
You may also claim for tax deduction on the sum donated to some organization. You may get 100 percent deduction depending up on the organization you donate to.