We know, nothing makes you happier than being rewarded for your hard work and efforts. While appreciation and recognition surely make you feel good, but at the end of the day, it is your payslip that fills your pocket, and supports your life. That is why you feel a sense of satisfaction when your salary gets credited to your account each month.
But as soon as the financial year ends, the burden of paying income tax starts hovering over your mind. While paying taxes is a mandatory requirement, still parting with your hard-earned money dampens your spirits. It is because you anyway find it hard to manage your expenses and spending and add to that this additional tax liability and your savings go for a toss.
However, there are many smart options and ways through which you can save tax, and thereby a great deal of the savings made during the year too. Therefore, it is vital that instead of avoiding your tax payment or delaying it thinking of what a liability it is, it makes more sense to look for tax-saving tips and advice. Delaying or not paying income tax can attract many penalties and punishments, which again will affect your goodwill and savings too. So, it’s essential to comply with income tax payment requirements according to the timeline provided, to keep such negative implications away.
How to Save Tax?
There are several tax-saving instruments that you can choose to purchase. Research thoroughly and then analyze the various options to select the most appropriate one for yourself.
Also, you should remember not to buy any plan or instrument for tax saving alone. Rather a wiser approach would be to take into consideration all the benefits that a particular plan is likely to offer you. Moreover, you should also pay heed to the income tax savings limit on each of the instruments. However, this shouldn’t be the only driving factor for you to purchase a plan. Its utility and return worthiness should equally be given importance.
For instance, buying health insurance for your family, and you will offer you tax saving benefits along with securing your family with a financial cover during any health crisis. This plan will have a reassuring presence in your kitty, as it will help you meet the hefty expenses that follow medical treatments and procedures. At other times, it will help reduce your tax liability each year, by allowing you exemption up to the specified limit.
Therefore, towards this, you should start tax planning at the outset of the financial year itself, so that you have enough time to assess your need of buying a specific plan, its suitability, and its possible pros and cons.
Tax saving Provisions
- Section 80C: This section offers a deduction on investments made, up to the limit of 1.5 lakh from your total taxable income.
- Section 80D: Under this section, you can claim deduction on a health insurance policy that you may have in your name or that in the name of your spouse, dependent children or parents.
- Section 80CCD: This section offers you tax benefits on the contributions made by you to any pension fund that you may have.
Tax Saving Instruments
- Unit Linked Insurance plan (ULIP) – This is one holistic instrument that will provide you with both life cover and investment benefits. Also, this is covered under Section 80C of The Income Tax Act, 1960, where you can claim a maximum deduction of 1.5 lakh. Moreover, even the gains under such a plan are free from tax. Reputable insurers like Max life Insurance offer ULIP plans that offer you the option to invest in six types of funds with various loyalty benefits too, and coverage up to 85 years. They also offer flexibility to switch your funds as many times as you wish.
- Term Insurance – The term plan provides your loved ones with a life cover to ensure that they remain financially secure even in your absence. Under Sec 80C, all the premiums paid towards such a cover are treated as deductions from your taxable income. Also, the policyholder can claim a total deduction of 1.5 lakh overall, under the same act if they have this plan.
- Health Insurance – Another excellent option to consider is to buy a health insurance cover. Under Section 80D, all the premium that you pay towards such a policy gives you tax benefit of up to Rs. 25,000, if the policy is in your name or that of your spouse, dependent children or parents (below the age of 60). However, if your parents are above the age of 60, then you will get a deduction up to the limit of Rs. 50,000.
Don’t Let Taxes Be A Spoilsport
Similarly, there are many other plans like the Equity Linked Savings Scheme (ELSS) and PPF (Public Provident Fund) which offer similar tax benefits. Depending on your requirements, you can include any one of these in your portfolio to not just reap the benefits of tax saving, but also to enjoy the other benefits attached to such instruments.
So, along with working hard to earn your salary month after month, also plan your tax-saving properly, so that you don’t lose out on all the tax exemptions and benefits. Just remember to check other factors related to each option, along with checking the income tax savings limit with each plan. This way, you will make the best decision for yourself.