Trying to save income tax with only a few days left in the current financial year is like trying to score 6 off the last ball of the match to win the game. It’s tough, but as we know by recent events, it can be done!
So, here we are, offering you a quick 3-minute guide to help you save income tax at the last minute.
Before we begin though, here’s a quick run-through to help you understand the various ways in which you can save income tax, so you can plan your investments well in advance next year:
Income Tax Act in India has many provisions that allow us to save money, so we can increase our take-home salary. However, you need to know these rules/provisions in order to get the maximum possible tax benefit on your income. I would suggest you to first go through your salary slip. You can check out our complete guide to understanding the components of salary slip here.
1. Tax saving on house rent allowance
House rent allowance (HRA), allows an individual to save tax on the rent you pay to your landloard under Section 10 (13A) of the Income Tax Act.HAR is taxable if you don’t pay any rent, or stay in your own house. However, if you stay with your parents, you can claim the benefits of HRA by paying rent to your parents.
2. Deductions under Section 80C
You can claim tax benefits on investments upto Rs 1.5 lac under the section 80C of the Income Tax Act. Investments under this section include EPF, PPF, National Savings Certificate, Tax-saving FDs. Premium paid for Life Insurance, NPS & Tax-saving mutual funds (ELSS funds) also qualifies for tax benefits under this section.
3. Deductions under Section 80CCD(1B)
Over & above the limit of 1.5 lac under Section 80C, this section allows benefits on investments upto Rs 50,000 in NPS tier 1 account.
4. Deduction under Section 80E
An education loan taken for yourself, spouse or children allows for exemption on tax on the interest paid upon such loan. There is no upper limit on the amount of deduction. However, the loan must have been secured from a financial institution or approved charitable institution for a full time higher education.
5. Deduction of interest on housing loan (Section 24B)
The interest paid on housing loan qualifies for tax benefit under this section. Interest upto Rs 2 lac per financial year is allowed as deduction. Interest upto Rs 30,000 is allowed on home improvement loans as well.
6. Tax benefit under Section 80TTA
Interest income upto Rs 10,000 per year from a savings account is allowed as deduction from taxable income. Interest from fixed deposits & term deposits however does not qualify.
Now, back to…
What you can do right now to save income tax:
Your best tax saving buddy right now is Section 80C of the Income tax act (which allows for a maximum investment of Rs 1,50,000).
All you have to do is figure out your contribution in the EPF, and then invest the remainder amount in either PPF, ULIP, ELSS, or a five-year fixed deposit.
You could also invest in the NPS, and also keep in mind that health insurance scheme taken for both yourself and senior citizens in your immediate family are applicable for income tax reduction. Although, getting a new life insurance scheme might not be possible since it will take time.
Try investing in ELSS mutual funds for your tax saving investments this year. Not only do they offer higher returns than any other section 80C investment, but also have the lowest lock-in period of only 3 years.
With all that covered, you can relax. But make sure you keep all the other points we’ve made and plan your taxes better in the next year!