Every year we get reminders from our CAs or employer that it is the season to plan your taxes. The best time for tax planning is the beginning of the financial year. Most of the taxpayers delay it till the last quarter resulting in hasty decisions. If you plan our or tax-saving investments at the start of the year, your investments can compound and help you achieve long-term goals.
Taxpayers are generally aware of common tax-saving deductions, for example – section 80C of the Income Tax Act, 1961, that can be availed during the financial year. However, there are other deductions available under different sections of the Income Tax Act that can help an individual to bring down their tax liability further.
But before we discuss about various tax saving investments, it is important to check your tax slabs based on your taxable income:
Tax Slab | Individual Tax Payer (<60 years old) | Senior Citizen (60-80 years old) | Super Senior Citizen (>80 years old) |
Nil | Up to Rs. 2,50,000 | Up to Rs. 3,00,000 | Up to Rs. 5,00,000 |
5% | Rs. 2,50,001 – Rs. 5,00,000 | Rs. 3,00,001 to Rs. 5,00,000 | NA |
20% | Rs. 5,00,001 – Rs. 10,00,000 | Rs. 5,00,001 to Rs. 10,00,000 | Rs. 5,00,001 to Rs. 10,00,000 |
30% | >Rs. 10,00,000 | >Rs. 10,00,000 | >Rs. 10,00,000 |
Now that we have figured out the tax slab, here are a few tax-saving recommendations. Section 80C, 80D and 80G of the income tax list can help you in this regard.
Let’s now discuss different subsections under Section 80 in detail:
Section 80C: It is the most commonly used section where an individual can save tax by investing a maximum of Rs. 1.50 lakh in a financial year in specified avenues. Some commonly used investment avenues under section 80C are:
Investment | Returns | Lock-in Period |
Tax Saving Fixed Deposit | 6% to 7% | 5 years |
PPF | 7% to 8% | 15 years |
National Saving Certificate | 7% to 8% | 5 years |
National Pension System | 12% to 14% | Till Retirement |
ELSS Funds | 15% to 18% | 3 years |
ULIP | 7.60% | NA |
Senior Citizen Saving Scheme | 7.40% | 5 years |
Few more options under Section 80C
Section 80CCD: Section 80CCD allows you to further bring down your tax liability. It has two further subsections:
Section 80D: Under this section, you can claim deduction up to Rs. 1 lakh for contributions towards medical insurance premium for self, spouse, children and parents. The deductions under this section are over and above exemptions, you claim under Section 80C.
Section 80E: Under this section, the amount spent on repaying the interest against an educational loan can be qualified as a deduction.
Section 24: Under this section one can claim tax benefit on a maximum of Rs. 2 lakh on the interest paid on the home loan during a financial year. Note: This benefit is available only on a self-occupied property.
Section 80EE: Under this section of the Income Tax Act, first time home buyers can claim a tax deduction of up to Rs. 50,000. This deduction is over and above the limit provided in section 80C and section 24.
Section 80G: Did you know, contributing to charity can also help you save tax. Under this section, you can claim a tax deduction on donations made to charitable organizations.
Section 80GG: The House Rent Allowance (HRA) component in your salary breakup can be used to claim a tax deduction.
Section 80TTA: The interest earned on balance in a savings account is taxable under income from other sources. However, interest earned up to Rs. 10,000 from these sources in a financial year can be claimed as a deduction from total income.
The deduction is allowed on:
Section 80TTB: Senior citizens can claim a maximum deduction of Rs. 50,000 from gross total income under this section.
Section 80DD & Section 80U: Under these sections, if you or a dependent family member is who is differently-abled and entirely dependent on you, a deduction up to Rs. 75,000 is allowed if the disability is more than 40 per cent but less than 80 per cent. If the disability is more than 80 per cent a deduction up to Rs. 1,25,000 can be claimed.
Section 80DDB: Under this section you can claim tax deduction on medical expenses incurred to treat specific ailment. To qualify for tax deduction under this section you will need to produce a certificate of the disease.
Conclusion:
It is best to begin investing in the first quarter of the financial year so that you can spread your investments over the year. Doing this won’t burden you at the end of the year and will also allow you to make informed decisions.
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