Worried about Income Tax Savings? Here’s All You Need to know
Around the time of filing income tax, almost everyone starts searching for the tax-saving plans. The best way to do this is by investing money in savings plans to get relief under Sec 80C of the Income Tax Act. This is the key section of the Income Tax Act that explains how you can claim deductions from your income in various ways. Let’s look at how you can reduce your taxes and save money.
Deductions under Section 80C
Section 80C of the IT act allows you to claim deductions on your income for certain tax saving options. You can find the best investment plans that allow you to save money for the future while claiming deductions. You can save up to Rs. 1.5 lakhs and deduct the entire amount from your income. Some of the popular options to save tax under Sec 80C are:
Public Provident Fund: Apart from the Employer Provident Fund, you can open a Public Provident Fund (PPF) account. You can get around 7% to 8% interest on your savings and take it back after 15 years and claim deductions for the money you invest each year.
Tax-saver Fixed Deposit: This is a tax saving plan built into a fixed deposit (FD). A 5-year FD can fetch you returns of 5-7%. You can get back your money after 5 years. However, the interest earned is taxable.
National Pension Scheme (NPS): This is one of the best investment plans that help you save taxes. You can invest money in NPS to earn a pension after you retire. You can expect 12-14% interest. Your money would be partly invested in the stock market.
Equity-linked Savings Scheme (ELSS): An ELSS tax saving plan is a mutual fund investment where your money is invested in the stock market. You can earn an interest of around 15 to 18% from it, which is, subject to stock market performance.
Life Insurance Premiums: The insurance you pay for a life insurance policy is considered as tax savings and you can get exemption on tax for the premium you pay. You can also get a return of around 4-8% on it.
Other tax saving options
Apart from Rs. 1.5 lakhs you save by investing in the above schemes, there are other options too:
Premium paid for your health insurance policy can be claimed as a deduction for a limit of INR 25,000. You can get yourself and your parents insured for up to Rs. 75,000.
Interest paid to repay home loans can be claimed as tax deduction under Sec 80EE for up to Rs. 50,000.
You can claim deductions for the home rent that you pay under Sec 80GG with a limit of Rs. 60,000.
There are plenty of options to help you save taxes. If you plan well, you can save tax and invest that amount in other plans for the future.