Saving tax is a top priority for everyone. However, tax saving is very different from tax evasion and everyone should look for legal and accepted ways to save tax or else it will become evasion. Thankfully, there are some very effective ways in which you can save your tax money this tax season. Take a look at this article to know more about the tax-saving tools and tips and make an economically smart move.
Tax saving tools under Section 80C
Under Section 80C of the Indian Income Tax act, there are some provisions for tax savings. You can get a maximum exemption of Rs 1.5 lacs a year if you invest in the following:
- Fixed deposits of five years – Bank fixed deposits made for periods of five or more years help you to save tax under Section 80C. All contributions you make to the FD are tax-deductible. However, the income you earn from the fixed deposit is taxable under the prevailing tax norms.
- Public provident fund – The Public Provident Fund, or PPF, is a post office savings scheme that helps you to save money and save tax as well. The contributions made in a PPF account are tax-deductible under Section 80C. You can make small contributions in a year and build up a corpus over a period of time. A PPF carries a lock-in period of 15 years. You can get the tax benefit for the entire duration of the investment.
- National Savings Certificate – The National Savings Certificate, or the NSC, as it is popularly known, is a very good tax saving investment option. This is also a post office savings scheme that offers high returns of 12% to 14% each year. You get a tax rebate of up to Rs 1.5 lacs when you invest in the NSC. You can stay invested in an NSC for periods of five or ten years.
- ELSS Funds – ELSS Funds are tax saving mutual funds that offer tax rebates of up to Rs 1.5 lacs per annum. They are one of the most prefered saving schemes in the country, as apart from offering the tax benefits, they also offer very high yields and returns. An ELSS fund has a lock-in period of three years, which is the shortest among all the Section 80C investments.
- Life insurance plans – Life insurance is a very important product that everyone must have. A life insurance plan offers many benefits, tax-saving being one of them. You can claim a tax rebate of Rs 1.5 lacs a year when you invest in life insurance. This is valid for all types of life insurance policies including the endowment plans, pension plans, term insurance plans, ULIPs, child plans, money back plans, etc.
- Home loans – Property investments are always considered to be good investments. When you take a home loan to buy a property, you get the tax benefits available under Section 80C. This is available for the principal component of the home loan only.
These are some attractive ways in which you can save money under Section 80C of the Indian Income Tax Act.
Other tax-saving tools
Apart from the tools mentioned above, you can also save tax by investing in the following:
- Health insurance plans – Just like life insurance, health insurance is also very crucial. Buying a health plan has many advantages such as tax benefits. You can get a tax benefit of Rs 25,000 under Section 80D for the health insurance premium you pay. You can also get a tax benefit of Rs 50,000 if you buy health insurance for your parents who are senior citizens.
- Property investment – When you repay your home loan, you get an added tax benefit under Section 24 of the Indian Income Tax Act. Here, you can get a maximum tax rebate of 2 lacs in one year.
Use these methods wisely and save a lot of tax money.
In conclusion
As you saw, there are some very handy ways in which you can save tax. The investments are very useful for you as well so do look to make a few investments and get set to reap the many benefits they offer.
