New Year Tax Planning: We all pay tax on food items to movie tickets. There is no way to avoid this, but there are many ways through which the least tax liability can be ensured.
New Year Tax Planning: We all pay taxes on everything from food items to movie tickets. There is no way to avoid this, but there are many ways through which the least tax liability can be ensured. There are two types of tax to be paid in India – direct tax and indirect tax. There is no way to avoid indirect tax from this, but direct tax can definitely be reduced. However, it requires special planning. This is the new year but it is also the last quarter of the current financial year 2021-22, so on the basis of your financial goals, do tax planning as soon as possible so that you can avoid the last minute rush i.e. at the end of March. There are 10 ways through which you can reduce your tax liability including PPF, NSC and life insurance premium.
Public Provident Fund (PPF)
PPF has long been the preferred tax option to save tax. Under this, you can get a deduction of Rs 1.5 lakh under section 80C of income tax in every financial year. Apart from this, you can also get a return of 7-9 percent on this. There is a government guarantee on PPF, that is, it is one of the safest investment and tax saving options. The advantage of investing in PPF is that the capital, interest and maturity amount deposited in it are all tax free. However, the capital invested in it remains stored for 15 years, that is, it is not a better option for short term investors.
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National Pension Scheme (NPS)
NPS is a pension plan sponsored by the government, on which tax relief is also available. Taxpayers can claim deduction of Rs 50,000 under section 80CCD(1B) and this benefit is in addition to the benefits available under section 80C.
Premium paid for life insurance policy
Life insurance policies are becoming increasingly popular. You can avail deduction of up to Rs 1.5 lakh under section 80C on the premium paid for this policy. However, to avail this benefit, it is necessary that the insurance cover should be about ten times or more than the premium amount.
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National Savings Certificate (NSC)
For taxpayers who cannot bear the risk, there is another government option to save tax, NSC. There is no minimum amount requirement for investment, but tax savings can be claimed under section 80C only on deposits up to Rs 1.5 lakh. It has a lock-in period of 5 years, which means it can be a better short term tax saving option for risk-averse individuals.
Equity Linked Savings Scheme (ELSS)
ELSS is becoming increasingly popular for tax saving as it is equity based ie being market linked, it has the potential to generate great returns. Apart from this, it is also becoming the preferred option because it has the shortest lock-in period among all the tax saving options. The lock in period of ELSS is 3 years. The benefit of deduction up to Rs 1.5 lakh can be availed under section 80C on the money deposited in it.
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home loan
You can avail deduction of Rs 1.6 lakh under section 80C on the principal amount of the loan taken for the house. Apart from this, one can save additional tax under section 24B of income tax on interest paid on home loan up to Rs 2 lakh.
tax saving FD
Tax saving FDs with tenure of five years are one of the preferred tax saving options for senior citizens and retirees. Through this, the benefit of deduction up to Rs 1.5 lakh can be taken under section 80C. However, TDS (Tax Deducted at Source) is levied on the interest earned on FD, which can be saved by filing Form 15G.
Like Samriddhi Account
To secure the future of girls, the facility of Sukanya Samriddhi Account is provided by the government. You can get deduction of up to Rs 1.5 lakh under section 80C on the money deposited in its account. The benefit of tax exemption is available not only on the money deposited in this account but also on the interest received on the deposited money.
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children’s tuition fees
If you have income from salary, then tax savings can be done even on education of up to 2 children. You can claim tax deduction of Rs 1.5 lakh under section 80C for tuition fees for education up to two children.
interest earned on savings account
If you have a savings account in any bank, then the interest earned on it, you also get tax benefits. Taxpayers below 60 years of age can save tax on savings account up to 10 thousand rupees and taxpayers above the age of ie senior citizens can save tax on interest up to 50 thousand rupees.
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