What are 11 ways to save Income Tax?
People have the opportunity to save income tax by investing up to Rs 1.5 lakh in various schemes under the section 80C of the Income Tax Act in a financial year. Most people only save tax by investing in LIC, PPF etc. but there are many other options where investing can be taxed under section 80C. In this article we will learn about some such investment options.People have the opportunity to save income tax by investing up to Rs 1.5 lakh in various schemes under the section 80C of the Income Tax Act in a financial year. Most people only save tax by investing in LIC, PPF etc. but there are several other options where tax can be saved under Sec 80C. In this article we will learn about some of these such investment options.
1. Equity Linked Savings Schemes (ELSS)
This is the best tax savings option available these days. The funds under these categories gives 12-13 % of returns in long term. Some of the funds also gives upto 15% returns. In the long term 2-3 % makes huge difference.
2. Tuition Fee of Children
As a teaching fee for education of one or two children, the payment amount is exempt from income tax and you can take advantage of it under section 80C. If the children are twins then the third child can also get the benefit. Keep in mind that only the fees paid in India come under its purview.
3. Infrastructure Bond
Infrastructure bonds are popular with the infra bonds. It is issued by infrastructure companies, it does not release the government. In this section 80C, a rebate of up to Rs 1 lakh is available in income tax, whereas in the section 80 CCCF, an additional rebate of Rs 20,000 is available.
4. Employees Provident Fund (EPF)
5. Home Loan Payment
You are eligible for the exemption under the principal repayment of Home Loan Section 80C. If you have purchased a new home and have taken home loan for it, you can take advantage of it in section 80C. Here's a point to note that the monthly installment (EMI) of housing loan consists of two components - "principal" and "interest". You will get discounts only under Section 80C of the amount of the principal portion. The interest portion is also eligible for income tax exemption but not under section 80C, it is under section 24.
6. Investments in Public Provident Fund (PPF)
Deposits deposited in PPF account are eligible for tax deduction under Section 80C. To open an account in the PPF, the account can be opened at a minimum of Rs 500, while tax exemption can be claimed by depositing a maximum of 1.5 lakh in a full fiscal year. In PPF, interest is paid every year on deposited amount, which is determined by the Finance Ministry. The interest rate for the financial year 2017-18 is 7.8%. PPF has a tenure of 15 years, after which the withdrawal is tax-free. Loan can also be taken on deposit amount in PPF.7. Investing in Fixed Deposit (FD)
If the amount deposited in the term deposit is kept in the bank in the income tax scheme for 5 years, then that amount is eligible for tax deduction under Section 80C. In this, tax benefit up to Rs 1.5 lakh can be earned. It earns 7-9% interest on deposits. However each bank offers different interest in it. The problem with this is that if you deduct the deposit after the maturity period, the interest earned as interest is added to the taxable income.
8. National Savings Certificate (NSC)
The NSCs used in the financial year are used to save tax in the same year. To save taxes under Section 80C, up to 1.5 lakhs can be invested in NSC. NSCs can be bought from registered post offices but their maturity period is 5 years. Interest is available annually but the interest is taxable. The current interest rate for the fiscal year 2016-17 is 8.1% on NSC.9. Investment in Unit Linked Insurance Plans (ULIP)
ULIP is a mixture of insurance and investment. A portion of the amount invested in ULIP is used to provide insurance and the balance is invested in the stock market. Investments up to Rs 1.5 lakhs in ULIP are eligible to save income tax under Section 80C. ULIP does not give guaranteed returns because they are equity market-linked products. The disadvantage of ULIP is that they do not clearly tell where the investment has been done and how much the rupee has been deducted for the commission and other expenses.Read Here if you want to know details of ULIP.
10. Investments in Sukanya Samrudhi Yojana
In the Sukanya Samrudhi Yojana, the account can be opened till the age of 10 years from the date of birth of a girl. It can be deposited from minimum 1000 rupees to a maximum of 1.5 lakh every year. Income tax up to 1.5 lakhs is deducted through this scheme under Section 80C. Interest rate 8.6% for the financial year 2016-17 has been set on the Sukanya Samrudhi Yojana. The tax on the total interest earned on the end of the scheme does not seem to be taxed. This account lasts 21 years from the date of opening or the girl's age is 18 years.11. Senior Citizen Savings Scheme (SCSS)
Senior Citizen Savings Scheme (SCSS) is a product of Government of India. This is one of the safest investment options. People over 60 years of age can open this account. Investment can not be withdrawn for 5 years under this scheme. Depositors can increase this deposit and for 3 years. In this scheme, the depositor gets 8% - 9% interest. Interest received from the investment is not tax free.Thus, you can save income tax with the above 11 ways given above. It is important to keep in mind that the government is giving exemption to invest money in all these mediums so that the people can be encouraged to invest in savings and investment. This type of investment can reduce the risk of people and also increase the flow of money in the economy which will help in fulfilling financial shortcomings in the areas that are necessary.
Until next time.
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