If you have recently started working and have no clue about how the whole taxing system works, there are a few things that you must know. If you’re wondering how to reduce taxable income, there are a number of deductions available under various sections.
In this blog, let’s explore deductions under sections 80C and 80D.
80C investments are the most common deductions. It’s one of the best ways to save tax. The maximum limit under this deduction is Rs.1,50,000 per annum. The instruments that let you avail 80C deductions are as follows.
- PPF (Public Pension Fund)
PPF is a long-term investment with a lock-in of 15 years. The return on PPF is determined by the government and is currently in the range of 7-8% annually. An individual can invest any amount in PPF but will be eligible for tax benefits of up to Rs 1.5 Lakh only. Also, the interest earned on the amount at the end of the term is tax-free. - Life Insurance Premiums
If you are paying a premium for yourself and your dependents, you will get deduction under Section 80C for the premium paid. Also, if you have a policy with maturity payment, the payment on maturity is also exempted from taxation - NSC (National Savings Certificate)
The Indian Postal Service issues National Savings Certificate (NSC). The investment and interest on the investment are exempted from tax under section 80C. NSC comes with five years and ten years of maturity. - 5 Year Tax Savings FD
The lock period for this FD is 5 years and you cannot make any premature withdrawals. Investing in a five-year fixed deposit provides you benefits under section 80C. Most importantly, the interest earned on these is also exempted from tax. The rate of interest varies from bank to bank. - ELSS (Equity-linked savings scheme)
ELSS is a mutual fund where the money is invested inequities. Also, ELSS fund comes with a three-year lock-in period and seeks to provide higher returns than any other instrument in the market. The investment in ELSS is eligible for tax deduction up to a maximum of Rs 1.5 lakh under section 80C. - National Pension Scheme
The National Pension Scheme (NPS) enables an individual to plan for retirement. The premiums paid for pension plans are eligible for deductions under Section 80C. - Home Loan Repayment
If you have taken a home loan and are paying EMIs, the EMI amount qualifies for deduction under this section. - Tuition Fees Paid
Tuition fees that are being paid for your children are also eligible for deduction under this section.
Now that you have an idea of investments under Section 80C, let’s look at Deductions under Section 80D.
You are allowed to claim a deduction of up to Rs.25,000 for medical insurance premiums under Section 80D. The premium should be for you, your spouse, and your dependent children. On the other hand, if there is a chance that either you or your spouse is a senior citizen, the limit goes up to Rs. 50,000.
Tax Planning helps you to smartly invest in savings instruments, thereby offering combined benefits of investment growth as well as a reduction in the amount of taxes paid. It’s always recommended to start investing in tax-saving instruments at the beginning of the financial year so that you are able to save as much as possible. If you haven’t planned your taxes for this year yet, start now!
Source – https://wizely.in/wizeup/income-tax-saving-investments
