These Smart Investments are Just What you Need to Save Tax this Year
An increment in your salary could lead to a higher tax rate. Once your monthly income exceeds the Rs.2.5 lakhs threshold, you enter the tax paying bracket. The more you earn, the more taxes you pay.
You cannot ignore paying taxes but you can claim exemptions. These allow you to minimize the impact on your income.
Tax Deductions
The most important one is Section 80C of the Income Tax Act. It allows you to avail tax deductions up to Rs.1.5 lakh on the payments and investments you make.
For instance, if your annual income is Rs.5 lakh, as per your tax rate of 5%, you pay Rs 12,500 as income tax for the year. However, the added tax benefit under Section 80C brings down the amount to Rs.5,000.
Such investments are always a good idea, not only for their tax-saving abilities but also because they could help you earn an income on them.
There are plenty other investments that also make it to the list of deduction under Section 80C, which you can read about here.
We’ve listed out some of the most popular and smart choices of investments that you can claim under Section 80C of the income tax act.
Investing in them allows you to claim deductions of up to Rs.1.5 lakh annually based on your investments.
Fixed Deposits (FD)
When you take a bank FD for a term of 5 years, you are eligible to claim income tax deductions under Section 80C. Furthermore, it not only provides tax-savings but also offers a safe and guaranteed return.
Keeping your money in an FD could prove to be a good tax-saving plan over a normal savings account where the interest rates are usually quite low.
Equity Linked Savings Scheme (ELSS)
Equity Linked Savings Scheme (ELSS) are considered as one of the most popular tax-saving investments in India.
They not only offer income tax deductions for salaried people but also invest in equities with the potential of maximum return.
ELSS have a lock-in period of a minimum 3 years but could offer high returns over a long-term under favourable market conditions.
Public Provident Fund (PPF)
Public Provident Fund (PPF) is another tax-saving option for salaried people.
It allows you to save tax under Section 80C and also comes under the EEE (Exempt-Exempt-Exempt) category where the amount you invest, interest earned, and the maturity proceeds are all exempt from tax.
You could consider a PPF as they offer better returns than FDs, but the lock-in period is much more.
Life insurance premium
Your life insurance premium also makes it to the list of deduction under Section 80C. Moreover, a life insurance has dual benefits.
It gives you a life cover and also acts as a tax-saving instrument. The premium you pay on a life insurance plan is deducted from your total income, which lowers your taxable fraction.
National Savings Certificate (NSC)
National Savings Certificate (NSC) is an instrument that offers guaranteed returns and is issued by the government.
There are two types of NSC, one with a lock-in period of 5 years and the other for a duration of 10 years.
You can claim tax deductions under Section 80C on both of them. You can purchase NSC from a local post office.
Home Loan
When you buy a house on loan, you get multiple home loan tax benefits. One of them is the tax deduction under Section 80C.
You can claim a maximum amount of up to Rs1.5 lakh on the principal portion of the EMI paid for the year.
If you take a joint home loan, then each of the co-applicants can avail Section 80C deductions individually too.
National Pension System (NPS)
National Pension System (NPS) is another instrument launched by the government with an aim to provide retirement income to all citizens.
You can invest up to Rs.2 lakhs under your NPS account and then claim tax benefits on it under Section 80C and 80CCD(1B) too.
If you’re looking for loans or other financial products to claim tax deductions, Bajaj Finserv offers them to you through a simplified process.
Just share your basic details and check out your special pre-approved offers here.
Category: Taxes
