Tax Saving – Investments In India
Most of the people take Tax Saving as Tax Planning. These two things are entirely different from each other. Many employed people don’t know that just saving Tax can make you actually lose wealth in life. Normally people invest in the month of January, February and March to save Tax. Tax planning with a comprehensive view of your all the life goals may bring you wealth sooner than otherwise.
There are many sections in which you can invest to save your Tax, but a few of them are popular among people. These are
Section 80 C
Individuals and HUF can invest up to 1.5 lac under this section. The investments qualify for deduction from income. One can invest in
Public Provident Fund
Life Insurance Plans
Equity Linked Saving Scheme
Tax Saving Fixed Deposits
Senior Citizen’s Savings Scheme
National Savings Certificate
Home Loan Principal in EMIs
Tuition Fee of Kids
Section 80 CCC
Pension Plans / Pension Policy
Section 80 CCD
NPS – National Pension Scheme
Section 80 D
Under this section, you can avail tax benefit by deducting the premium paid for Medical Insurance, up to 25000 for your family and 30000 for Elder parents. You can get this deduction on yourself, your spouse, dependent children and your parents. You can also take advantage of this section for super senior family members. If you do not have a medical insurance for them and you bear all the health related expenses on yourself, than you can claim an amount of Rs. 30000 as deduction.
Section 80 DD
Deduction of Rs. 75,000/-
Expenditure incurred on medical treatment, (including nursing), training and rehabilitation of handicapped dependent relative.
Payment or deposit to specified scheme for maintenance of dependent handicapped relative.
Unit Linked Insurance Plan
ULIP Plan is an Insurance product which provide insurance cover as well as the option of investment. A little part of premium goes to insurance of policyholder and remaining part invest in stocks, bonds and mutual funds.
Further, if the defendant is a person with severe disability a deduction of Rs. 125,000/- shall be available under this section. The handicapped dependent should be a dependent relative suffering from a permanent disability (including blindness) or mentally retarded, as certified by a specified physician or psychiatrist.
Note: A person with ‘severe disability’ means a person with 80% or more of one or more disabilities as outlined in section 56(4) of the ‘Persons with Disabilities (Equal opportunities, protection of rights and full participation)’ Act.
Section 80 E
Under this section, you can avail tax benefit by deducting the interest paid on education loan for yourself and kids for a period of 8 years from the start of repayment. You can take loan for higher education, either in India or in any foreign country. You can use this amount for vocational courses and for regular courses. Yu can take loan from banks, financial institution or from approved charitable institution but not from relative and friends.
Section 80 G
Under this section, you can avail tax benefit by deducting the amount paid as charity to eligible organizations, up to the limit of 10% of your Adjusted Gross Total Income.
Under this section, you can avail tax benefit by deducting the interest amount paid in your Home Loan EMIs in the financial year from your total income up to maximum limit of 2 lac. This limit is for self-occupied house and there is no limit of deduction in case of let out property. If the home loan is taken in the joint name than both will get the advantage of this section.
Myths of Tax Saving
- Tax Saving is always good.
- By Tax Saving money can be saved.
- Money should be invested for Tax Saving.
What is Tax Planning?
There are different provisions given by the Government to plan your finance according to the Tax Planning Rules. This makes you plan in long-term and saves a large amount of money if planned carefully. THIS IS NOT TAX AVOIDANCE. There are different heads of income, by which your finance can be planned.
Heads of Income
Profit from Business / Profession
Income from House Property
Income from Other Sources