It is said that history repeats itself. And it actually does. Every year the seasons change and by the time March rolls by, everyone is busy with their last minute tax planning. They promise that they will start tax planning well ahead next year but the seasons change and everything goes on as usual until March comes knocking again.
But how about you give it a tweak? Since the new financial year has just begun, you have the opportunity to start your tax planning very early. Here is how reducing your tax burden is possible:
- Public Provident Fund (PPF)
PPF is a very popular investment avenue among investors because it offers decent, stable returns but also helps you earn tax benefits. If you are already investing in a PPF account, you can avail tax benefits under Section 80C of the Income Tax Act. Deposits made in a PPF account are eligible for a tax deduction of Rs 1.5 lakh per year.
- Senior Citizen Saving Scheme (SCSS)
SCSS is a great way for retired people to earn a steady income in the form of interest earnings. It offers assured returns, regular payouts and safety of invested capital in addition to tax benefits. If you are above the age of 60 or if you are above 55 and have taken voluntary retirement, you are eligible for this scheme. The scheme currently offers an interest rate of 8.3%. By investing in the SCSS, you can avail a tax deduction of Rs 1.5 lakh per year under Section 80C.
- Equity-linked Saving Schemes (ELSS)
One of the best ways to earn good returns and also enjoy tax benefits is to invest through ELSS funds. This is a mutual fund vehicle that is equity based. This means that the returns are linked to the performance of the stock market. This might sound risky but in reality, you can earn good returns while reducing your risk to a minimum. This is possible by investing through Systematic Investment Plans (SIPs).
As for tax benefits, you can avail a deduction of Rs 1.5 lakh under Section 80C. And the cherry on the cake is that the returns you earn on your investments are totally tax free. These are the reasons why ELSS funds are quite popular among many investors in the country.
- Children’s tuition fees
Education is a very important tool for the growth of the future leaders of the nation. But when it comes to the family level, it can be quite expensive. That’s why here is a way to relieve some of that burden through tax benefits.
You can claim a tax deduction of Rs 1.5 lakh under Section 80C for any tuition fees that you may have paid during the year. For example, imagine you have two children going to school. If the tuition payments for each child are Rs 35,000, you have paid a total of Rs 70,000 per year towards tuition fees. You can claim this amount as tax deduction under the IT Act. This way, you can increase your savings substantially during the year.
- Health insurance
It is always prudent to have a health insurance, especially with medical inflation rocketing skywards in the last few years. In addition to medical benefits, this also offers you tax benefits. Under Section 80D of the IT Act, you can avail a tax deduction of Rs 25,000 each year if you have a medical insurance policy. In the case of senior citizens (above the age of 60), this limit is raised to Rs 50,000 as per the new changes in Budget 2018.
Conclusion
People say that when god closes a door, he opens a window. The same can be said about the Indian tax laws. You may have a lot of expenses in your daily life but by being aware of the different tax benefits available, you can open a window of opportunity to increase your yearly savings. The important thing here is to start your tax planning early. This way, you can ensure that your next tax season is cool and relaxed.