Tax planning is an essential part of financial planning. A thorough income tax saving plan will allow you to increase your net income by reducing your taxable income. The Income Tax Laws have special provisions in place that offer you different options to save income tax by investing and spending in certain channels. Let’s learn about a few tricks that will help you save tax.
Section 80C is one of the most versatile sections of the tax laws since it offers multiple deductions. Payment of premium for regular income insurance plans, contribution to the Public Provident Fund, and premium payment for genric savings insurance are all deductible under this section.
Section 80CCC allows you to deduct the amount paid towards your pension plan. However, under this section, you can avail of deductions up to ₹1.5 lakhs only. If you want income tax saving beyond the ₹1,50,000 limit, then Section 80CCD offers an extra deduction of ₹50,000 if you have made a payment towards the NPS scheme.
You can also save by donating to various charities that are set up in India. You can avail of up to 100% tax deduction of the donated amount as a charity, depending on the list provided by the Indian government. Similarly, there are non-profit organisations that offer up to 50% deductions of the amount donated.
If you are more inclined to political matters than religious matters, then Section 80GGC is for you. Section 80GGC allows you to enjoy deduction benefits, provided you donate in a manner other than cash.
- Medical insurance premiums:
If you prefer medical insurance over other forms of insurance, then Section 80D will save you up to ₹75,000. As an individual, you are allowed to utilise the deduction of premium up to ₹2,50,000. If you have parents below the age of 60, then an extra ₹25,000 deductions are allowed. But if your parents are above the age of 60, you will get a premium deduction of up to ₹50,000.
Premium paid toward a savings plan that provides medical cover will come under Section 80D. Section 80DD deductions are only available in special cases where the taxable individual has dependents who are disabled. The deduction in such a case will range from ₹75,000 to ₹1,25,000, depending on the percentage of disability.
Section 80E comes to your rescue if you are still paying off your higher education loans. If you have taken a loan for yourself, then the entire interest amount can be claimed as a deduction. This section is especially helpful for bachelors since they can channelise the amount saved into other lucrative investment avenues such as a savings plan.
Section 80E is also applicable if you are the student’s legal guardian who has availed of the loan. The benefits of this section are only available for eight years after the beginning of interest repayment.
- Life insurance:
Life insurance is a multipurpose tax-saving instrument. A single insurance policy will allow you to utilise multiple sections at once. The regular premium amount paid towards the policy can be deducted from your total taxable income under Section 80C. If the policy provides medical coverage, you can avail of the benefits of Section 80D as well.
The policy that offers investment options will benefit the most; you will be able to claim a deduction on your invested amount referred to as a premium. If the plan promises to return the premium amount at maturity, then that amount will be entirely tax-free. Good savings plans with life cover offer dual benefits of tax deduction of premium paid and tax exemption on maturity benefits.
For example, Tata AIA premium payment towards its policies will be deducted under Section 80C, and after maturity, the payout amount will also be tax-free as per Section 10(10D) of the Indian Income Tax Act.
By investing and reaching the upper limits of Section 80C, you will save a lot of tax money and can diversify your investment opportunity. You should always consult a tax professional before taking advantage of these sections mentioned above.