Does That Tax hurt – Here Are Your All Tax Saving Options
Filing for our taxes at the end of every fiscal year is an excruciating task but inevitable. From the sheer volume of documents to be filed to making sense of how to save some money on your tax returns, it can feel daunting at times. If you have constantly felt this way and are looking for tax saving ideas, we are here to help.
As a honest hard-working citizen of India, paying your taxes (and paying them on time) is a requisite, but there are ways you can save money and do it all in a manner that doesn’t leave you unfazed in the last quarter of the financial year (and the first few months of a brand new year).
Before you can look at tax saving ideas, it is important to understand the different tax slabs and the various investments and allowances you can put aside that won’t be taxed. Let’s dive deeper in this enigma of tax-saving, shall we?
While this list on how to save tax is not exhaustive, there are quite a few exemptions that will help save a lot on your hard-earned money. These are tax saving options for salaried individuals that have always existed, but you may have missed earlier.
1. Start Your Tax Filing Early
One of the best tax saving options in India is to start filing your returns early. Waiting till the last minute or for your company to issue the deadline will only leave you high and dry when it is time to actually file everything. You might miss out on a key investment you have done or anything else that could save you money. Thus, when it comes to tax saving options, this is an understated fact and make sure you don’t shrug it off.
2. Make The Most of NPS and PPF
Under the Income Tax Act, there are various sections that allow a leeway for you to save taxes. Section 80C is one such section. It is one of the best tax saving options for salaried individuals as it covers your NPS, PPF and other such investments. If you haven’t started with the National Pension System, make sure you to so at the earliest to file this tax-saving investment in your returns this year. You will be able to save up to INR 50,000 per year under this section and all the money goes to your retirement fund which can be withdrawn after the age of 60.
Another investment vehicle that is safe exempted from taxation under Sector 80C is the Public Provident Fund. A government-initiated scheme, this comes with a tenure of 15 years and helps you make good on your investment. You can open a PPF with a designated commercial bank or a branch of the post office in India and given the money is invested in the public sector, there is no risk involved. The current interest rate on your PPF will be 7.1%.
3. Invest In Tax-Saving Mutual Funds
Another tax saving option under the Section 80C of the Income Tax Act is the equity linked savings scheme which is the only type of mutual fund that is exempted from taxes in India. Thus, this is a viable option for people who want to save taxes.
Make sure you invest in the right Mutual Fund and track the market conditions as everything is volatile. With ELSS, the risk is high to the amount you invest but in the long run, the inflation rate is adjusted, and you are bound to make good returns on your money. The only catch here is for this to become viable for tax-saving is that you have a minimum lock-in period of at least three years. You can invest a lumpsum amount together or go for Systematic Investment Plans when investing in equity or debt funds.
4. Save On Your Home Loan Repayment
If you are paying back your EMIs for home loan , make sure you file it in your tax returns as the principal amount that you repay qualified for tax exemption under Sector 80C of the Income Tax Act. Of course, the interest rate on the EMI is not included in this.
5. Don’t Overlook NSC
National Savings Certificate is another tax saving option that is a good investment option and completely tax-free. There is a fixed rate of interest on your NSC which at the time is 6.8%. The tenure for your NSC is five years and your money grows substantially in that time.
6. Opt For Tax-Saving Fixed Deposits
Everyone has a Fixed Deposit or is bound to create one after working for some time. This is one of the best tax saving options for salaried individual that is often overlooked. You can open a FD for five years with any of the banks that have tax saving FDs and you will be exempted from taxation under Section 80C of the Income Tax Act, 1961. The current rate of interest on these FD is 6.8%.
If you are children who are studying in an Indian school or university, you can file for return on their tuition fees as well. However, this option is only valid for people who have maximum two children.
Tax saving is not as daunting as it sounds, especially if you do your research and look for the best options that fit your salary bracket and lifestyle. From home loans, your FD, retirement corpus to the education of your child, everywhere there are tax saving ideas, provided you pay attention and closely watch your financial security.