INCOME TAX SAVING TIPS
In this column, we are discussing various investments against which a taxpayer may avail income tax deductions. This is part 1 of this series and we will be coming up with more tax-saving tips in our upcoming editions of this magazine.
1) Investment (Section 80C)
The maximum of Rs. 1,50,000 of deduction is available against investment in following:
1. PPF (Public Provident Fund):
Any amount invested in Public Provident Fund is allowed as a deduction. The tenure of PPF is 15 years and PPF account facility is available with most of the banks and post offices in India. The interest on PPF is tax-free.
2. Equity Linked Saving Schemes (ELSS):
Investment in ELSS is allowed as deduction which comes under the category of Mutual Funds wherein the risk factor is involved. ELSS have a lock-in period of 3 years. Any gain on transfer of ELSS is exempt uptp Rs. 1 Lakh and Long Term Capital Gains Tax (LTCG) of 10% is levied on gain over and above an exemption limit of Rs 1 lakh.
3. National Saving Certificate(NSC):
Investment in National Savings Certificate is allowed as deduction which comes with a tenure of 5 years and a fixed rate of interest.
4. Life Insurance Premiums:
Life Insurance Premiums paid for different types of insurance policies like ULIPs, Term Insurance and endowment policies are eligible for deduction. It is pertinent to note that insurance cover must be at least 10 times the annual premium.
5. Home Loan Repayment:
Repayment of the principal amount of Home Loan is deductible.
6. Payment of tuition fees:
Payment of Children’s tuition fees is deductible.
7. EPF:
Employees contribution towards Employees Provident Fund is deductible.
8. Sukanya Samriddhi Yojana
This account may be opened for a girl child who is below the age of 10 years and the amount deposited in this account is allowed as deduction by the Parents. This account has a tenure of 21 years or until the girl marries after turning 18.
2) Contribute towards National Pension System
Generally, contribution towards National Pension System falls under Section 80C. However, where an additional amount of Rs. 50000 may be invested in National Pension Scheme and deduction for it shall be available under Section 80CCD(1B)
Note: The amount of NPS may be withdrawn at the age of 60 years.
3) Pay Health Insurance Premiums
The amount of Medical Insurance Premium paid shall be allowed as deduction up to Rs 25,000. This is over and above the deductions listed above. This limit of Rs. 25000 is increased to Rs 50,000 in case of Senior Citizens. And where a person pays health insurance for himself and senior citizen parents can avail of the combined deduction up to Rs 75,000 per annum.
4) Get a deduction on your rent
Where assesse pays rent then deduction of upto Rs. 60000 per annum shall be available under Section 80GG. However, where assesse is in receipt of House Rent Allowance (HRA) then deduction under section 24 shall be available.
5) Medical Treatment Expenses
Amount incurred on treatment of specified diseases is allowed as deduction under Section 80DDB for up to ₹40,000.
6) Saving Bank Interest
Deduction of upto Rs. 10000 is allowed as deduction in respect of interest received on Saving bank account.