Tax saving Management

Recommended ways of saving taxes under Sec 80C & 80D

• Make investment of Rs 1.5 lakh under Sec 80C to reduce your taxable income
• Buy Medical Insurance & claim a deduction up to Rs. 25,000 (Rs 50,000 for Senior Citizens) for medical insurance premium under Section 80D
• Claim deduction uptoRs 50,000 on Home Loan Interest under Section 80EE

Investment options under Sec 80C

The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act,Section 80C includes various investments and expenses you can claim deductions on – up to the limit of Rs. 1.5 lakh in a financial year.

Investment	Returns	Lock-in period
5-Year Bank Fixed Deposit	6% to 7%	5 years
Public Provident Fund (PPF)	7% to 8%	15 years
National Savings Certificate	7% to 8%	5 years
National Pension System (NPS)	12% to 14%	Till Retirement
ELSS Funds	15% to 18%	3 years

Other Tax Saving options beyond Sec 80C

Apart from the 80C deductions, there are various deductions under Section 80 you can use to save on income tax. Tax benefits on health insurance premiums and home loan interest are a few.

• Buy Medical Insurance & claim a deduction up to Rs. 25,000 (Rs 50,000 for Senior Citizens) for medical insurance premium
• Claim deduction uptoRs 50,000 on home loan interest under Section 80EE
• A home loan would also help you in reducing your taxable income as the principal portion of home loan can be claimed under Section 80C uptoRs 1.5 lakh and the interest portion can be claimed as a deduction from income from house property

How to plan your tax-saving investments for the year

The best time to start planning your tax-saving investments is at the beginning of the financial year. Most taxpayers procrastinate till the last quarter of the year, resulting in hurried decisions. Instead, if you plan at the start of the year, your investments can compound and help you achieve long-term goals. Remember, tax-saving should be an additional perk and not a goal in itself.

Use the following pointers to plan your tax-saving for the year:

• Check the tax-saving expenses you already have – like insurance premiums, children’s tuition fees, EPF contribution, home loan repayment etc.
• Deduct this amount from Rs 1.5 lakh to figure out how much to invest. You needn’t invest the entire amount, if expenses are covering the limit.
• Choose tax-saving investments based on your goals and risk profile. ELSS funds, PPF, NPS and fixed deposits are some of the popular options.

This way, you can figure out how to exhaust the 80C limit. It is best to begin investing in the first quarter of the financial year so that you can spread the investments over the year. Doing this won’t burden you at the end of the year and will also allow you to make informed investment decisions.

Under 80C

ELSS Mutual Funds

Equity Linked Savings Scheme or ELSS are tax saving mutual funds where you can save up to ₹46,800 in taxes under Section 80C with a proven track record of consistent returns.

Under 80D

Health Insurance

Health insurance protects you from unexpected and high medical costs in cases of emergencies to secure your future both health-wise and money-wise.

What is Health Insurance?

Health insurance protects you from unexpected, high medical costs. In case you or any family members covered under the policy is hospitalized, Health Insurance company will pay for the hospital expenses up to the cover amount (called sum insured) you have selected.

The medical expenses include room rent charges, doctor's consultation fees, surgery fees, nursing fees, cost of medicines, X-rays, ECG, MRI, Blood, Oxygen, etc. incurred during hospitalization of 24 hours or more.

Under 80C

Term Life Insurance

Term Insurance provides cover for a fixed period of time during which, if the policyholder dies, the beneficiary is paid the selected cover amount (called sum assured). In case of your untimely death, term insurance ensures that your family doesn't suffer due to the loss of your income and protects their financial goals.

What is Term Insurance?

Term life insurance is a pure protection policy. In the case of the insured person's death during the policy period, the nominee gets the entire term insurance amount (sum assured) at one go. You can get term insurance at an extremely low cost, is easy to understand and you pay the same premium for the entire policy duration.

Under 80CCD (1B)

National Pension System (NPS)

India's own Pension System to help you plan for a stress-free retirement. Get tax-free amount at maturity and a regular income after retirement, helping you sustain your current lifestyle.

What is National Pension System?

National Pension System (NPS) is a pension cum investment scheme launched by Government of India to provide old age security to Citizens of India. It brings an attractive long term saving avenue to effectively plan your retirement through safe and regulated market-based return. Upon maturity, individual gets a lump sum amount along with regular income for a stress-free retirement.

FAQs – Frequently Asked Questions

• How Income Tax works in India? – Given a choice, most of us wouldn’t want to pay tax on the income we earn. But we should. As citizens of India, we are also consumers of the country’s public infrastructure and facilities, and income tax is an important source of revenue for the government. So, it is our duty and responsibility to contribute towards building and maintaining the public infrastructure. Paying income tax and filing income tax returns on time ensure that.

• Why are income taxpayers less in number? - Government data for AY 2014-15 shows that only around 1.5% of Indians pay income tax. This is because India is a developing country and 93% of Indian households earn less than Rs. 2.5 lakh annually, which is the minimum threshold limit for taxable income. Furthermore, agricultural income is entirely exempt from tax even when it crosses this Rs. 2.5 lakh limit. Hence, anyone who earns a taxable income should be proud to be a part of the tax-paying population.

• What is legal tax avoidance in India - While the government expects you to pay income tax, it also allows you to legally save on income tax. You don’t have to pay income tax if you earn less than Rs. 2.5 lakh in a year. Income more than that is taxed as per different slabs, with the tax rates going up with increase in income. No matter how much taxable income you earn, there are certain exemptions and deductions available to all individual and HUF taxpayers that can be used to pay less income tax.

• How to save taxes in India? - In India, a person can legitimately save his income taxes by investing his money in the popular tax savings options.
  1. One of the options is Section 80C. One can invest and claim Rs. 1.5 lakhs in the options available like PPF, NPS, EPF, Life insurance premium, tax-saving mutual funds (ELSS), children’s tuition fees and housing loan principal repaid among others.
  2. You can claim deduction up to Rs. 2 lakh for the interest component paid by you on the home loan, if any. Just claim this under section 24 of the Income from house property head.
  3. You can avail a benefit of Rs. 25,000 for the health insurance premium paid for yourself, your spouse and your dependent children under section 80D. In addition to it, you can also insure your parent’s health and claim an additional benefit of Rs. 25,000 under the same section 80D. This deduction limit is Rs 50,000 if your parents are senior citizens. Similarly, there are many tax savings options available under different sections of the Income Tax Act.