January marks the start of a new year, but it also marks the last quarter of the financial year. Its that time of the year where you have to start planning for taxes. I have been getting some queries as to how can one save tax, so this post is an answer to that. Its always a good idea to start early and start investing, for retirement and tax saving. We’re more concerned about the later, so lets get on with the ways you can do so.
Your interest paid on home loans is eligible for tax deduction. So you can save upto Rs 1,50,000 per year this way.
Medical Insurance Premiums: This is a must have really. I suggest everyone should get a mediclaim aka the medical insurance. According to Section 80D, you get a rebate upto Rs. 15,000 on the premiums. So its really worth it.
Section 80C Deductions
These are pretty famous ones, and used the most to save tax upto Rs 1,00,000. The tax saving instruments under Section 80C are:
Provident Fund or Public Provident Fund: Provident Fund (PF) or Public Provident Fund (PPF) is a nice way to save tax, if you are salaried chances are your employer is already deducting some amount towards PF, it has a good rate of interest and the amount of money deducted from your salary, equal amount is also added by the employer towards your Employees Provident Fund (EPF) account. So the simple math is that if you pay say Rs 4,000 annually towards your PF account your employer also pays Rs 4,000 annually, so that gives you Rs 8,000 plus 8.5% interest, which is really good.
Life insurance premium: Another must have. Everyone should have a life insurance. And whatever amount you pay towards the premium, is tax deductible. So get a insurance policy with a premium which satisfies your tax saving requirements. You can use a tax calculator to get your taxable amount. These days its usually the Unit Linked Inusrance Policy (ULIP) which are most in use. They are far better than the traditional insurance policies because the amount of money you pay towards the inusrance premiums you are alloted some units, which has certain value and which differs from insurance company to insurance company. So your unit will give you the value it will have after some years down the line, which is an added bonus to your policy maturity value.
Other than the ones mentioned above there are some more ways to save tax, such as Equity Linked Saving Schemes (ELSS) namely the mutual funds, National Savings Certificates (NSC).
So plan however you want to save tax and start early. Mind you some of the options are linked to the share markets, so it might not yield instant money, but in the long run its definitely worth a shot. So if you have a risk appettite, go for the ELSS.
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