The financial year is coming to an end in a matter of days. It is time for an investor to assess your success in comparison to your earlier-year investment targets. Sadly, this is when many are starting to explore ways to reduce their tax liability for tax savings investments in India.
It is also recommended that taxpayers begin their tax preparation early. The trick to saving taxes is to consider an individual’s best investing plan and where deductions may be sought. It is equally imperative that, during the early periods of the financial year, taxpayers have a planned long-term approach to taxation and invest in tax-saving instruments.
Here are several tax preparation strategies from financeglad of the last minute that will help you make successful last-minute choices.
Use Section 80C/80CCC/80CCD Investments
- Equity Linked Savings Scheme (ELSS): ELSS is the diversification of a mutual fund system whose investments qualify for deductions in taxes. In ELSS, at least 80 percent of the fund is invested in equity securities, and the returns are based on equity market results. Section 80C of the ITA permits the tax reimbursement of investments in ELSS of up to Rs. 1.5 lakhs. ELSS is a desirable method of generating money for a long period.
- Public Provident Fund (PPF): PPF is a central government guaranteed savings scheme. It also allows for a fixed rate of return of about 8%, and PPF contributions are liable for tax deductions under section 80C of the Income Tax Act. The maximum sum that you can deposit into an annual PPF every year is 1.5 lakhs and hence you can claim as deductions the entire amount deposited into a yearly PPF Account.
- National Pension Scheme (NPS): Under Section 80CCD (1B), persons invested in NPS may claim deductions of up to Rs. 50,000 including Rs. 1.5 lakhs under Section 80C. The Indian Government initiated NPS to permit industrial employees to earn pensions after retirement, and the returns are dependent on the performance of the equity market.
- National Savings Certificate (NSC): In fact, tax deductions for investments under a National Savings Certificate scheme are officially approved by the Indian Government.
Insurance Plans and Expenditure Deductions under Section 80C/ 80D/80DD/10(10D)
Section 80C requires tax exemptions of up to 10 percent (or Rs. 1.5 lakhs) to be provided by a policyholder on life insurance plans (self/ spouse/children/HUF members). Moreover, Section 10 (10D), which covers all the advantages of these unique life insurance plans, offers tax exemptions for statements such as death and maturity benefits.
House and School Loans Deductibles
Section 80C also allows principal repayment of household debts to be withheld from revenue. Similarly, the interest owed on house loans and tuition allowances is liable for tax deductions in compliance with Section 24 and Section 80e.
Early tax preparation is recommended for taxpayers to assess their tax saving plans for the financial year. At the eleventh hour, though, people would be willing to save a significant sum as taxes by mentioning current savings and thinking about deductibles on loan and insurance policies.