Ineffective tax-planning might result in a grave reduction in your take-home salary. Particularly in the last few months of the fiscal year, it might influence your consistent pecuniary obligations. Being a salaried employee, income tax-saving tips and ideas can play a dynamic and crucial part when you labour towards attaining your monetary goals. As such, an individual should have a strong tax-saving strategy at the commencement of the year. Implementation should take place during the year to avoid any last-minute problem. So pen down these tax-saving tips for income tax which could help you save a fortune!
As we approach the conclusion of FY2019-20, an individual ought to be perfectly prepared with your tax-saving strategy.
There is a crowd of valid and legal ways of tax-saving tips which will come handy under the Income Tax Act, 1961.
Some of them are as follows:
Utilize Rs 1.5 lakh limit deductions as laid down under Section 80C
The below-cited deductions or investments are subject to a ceiling of Rs 1.5 lakh. they are investments and investing in any one of them will reduce the cap for others.
Tax saving ideas for fixed deposits:
an assessee can get a tax deduction of up to Rs 1.5 lakh under 5-year tax-saver FDs. They have a fixed rate of interest presently amid 7-8%. The interest in these FDs is taxable to a certain extent.
Public Provident Fund:
Public Provident Fund is a savings structure with a tenancy of 15 years available at several banks and post offices in India. The rate of interest varies every quarter but is presently 8%. The interest received on PPF is tax-free.
Equity-linked tax-saving ideas (schemes):
These are mutual funds that finance a minimum of 80% of their assets in the equity market. These have a lock-in period of 3 years. The returns on these are subject to Long Term Capital Gains Tax at 10%, above an exemption limit of Rs 1 lakh.
National Saving Certificate:
A National Savings Certificate has a holding of 5 years and a fixed rate of interest. The rate at present is capped at 8%. The interest on NSC is also inevitably calculated to Rs 1.5 lakh 80C limit and used as a deduction if no other investment is up to that limit.
Life Insurance Premiums:
Premiums for diverse sorts of insurance policies counting Unit linked insurance plan, term insurance, etc are tax-deductible up to Rs 1.5 lakh. But, the insurance cover must more than the annual insurance premium. A deduction up to Rs 25,000 is obtainable for health insurance premiums under Section 80D. For senior citizens, this cap is amplified to Rs 50,000. An assessee paying for health insurance for himself and senior citizen parents can benefit from the collective deduction up to Rs 75,000 per annum.
National Pension System:
This deduction is available under Section 80CCD up to Rs 1.5 lakh for contributions such scheme. This is above the Rs 50,000 deduction available under Section 80CCD(1B). The amount for Deduction under Section 80CCD(1B) is Rs 50,000 and is only accessible for donations to the NPS. The NPS allows us to invest in equity and debt pension funds and build a retirement amount. You can withdraw it at age 60.
Home Loan Repayment:
Reimbursement of the principal sum on a home loan is deductible up to Rs 1.5 lakh per annum. If a home loan is availed, the interest due on it is tax-deductible under Section 24 of the Income Tax Act up to Rs 2 lakh per annum.
Payment of tuition fees:
Reimbursement of teaching payments for children is deductible up to Rs 1.5 lakh per annum.
Employee provident fund:
As per the EPF Act, 12% of the salary of personnel in the organized segment is deducted towards the Employees Provident Fund. This deduction amounts to the Rs 1.5 lakh limit under Section 80C.
Senior Citizens Savings Scheme:
Contribution to such a scheme is deductible up to Rs 1.5 lakh. SCSS has a holding period of 5 years and is available for individuals above 60 years. The interest rate for SCSS is more than predominant FD rates and is presently capped at 8.7% and it is taxable over and above 1.5 lakhs.
Sukanya Samriddhi Yojana:
Parents of a girl child under the age of 10 can avail this deduction. This account has a holding period of 21 years. It has an interest presently capped at 8.5% and the interest is tax-free.
Get a deduction on your rent
You can claim a tax deduction on your House Rent Allowance (HRA) if you get HRA. There is no upper cap for this but there is a customary of directives that limit the maximum HRA deduction. If an individual is no provided with HRA but he pays rent, he can claim a deduction under Section 80GG up to Rs 60,000 per annum.
Keep some money in your savings account
This is possibly the easiest deduction under the Income Tax Act an assessee can claim. No tax is chargeable on savings account interest for up to Rs 10,000 per year under Section 80TTA. This cap is Rs 50,000 for senior citizens for both fixed deposit and savings account interest. A great tax-saving tip for salaried employees.
Contribute to charity
An assessee can claim a tax deduction on charitable contributions. There is no maximum cap but different provisions confine the tax deduction amount available on charitable contributions. NGOs should have an 80G certificate for an individual to be able to claim this deduction.