Don’t Go Blind When Planning Tax To Be Paid On Your Income
We are in the season of Income Tax Returns. Just to save the tax amount, many taxpayers invest their hard earned money in various tax saving instruments; the pros and cons of which they don’t know about. Thus, to save thousand rupees of tax, they end up spending lakhs which in return; positions in a loss at the time of redemption.
Here are the ways how taxpayers can spend their hard-earned money which can get handsome return along-with saving the tax outflow in the given year.
The golden rule for investing your money is “Have a financial goal & risk appetite”. By this analysis one can know how to invest in proper tax/ non-tax saving instruments.
The Income Tax Act-1961 provides various deductions of Chapter-VI. Among those; deductions available under section 80 series is popular among taxpayers. Let’s learn few of them in detail.
This section of income tax act is most popular and mostly utilized by the people. This section can reduce your income upto 1,50,000 and can save your hefty amount of tax. This covers almost all beneficial investments which are safe as well as profitable. They are, Life Insurance Premium, PPF with minimum amount of 500Rs./month, mediclaim & tution fee of the child.
SECTION 80D: MEDICAL INSURANCE
This section provides deduction regarding the medical insurance amount received from the employer. Deduction limit is of 25000Rs for assesses. Additional 25000Rs deduction is allowed for expenses incurred on parents’ insurance & the same would increase up to Rs.50,000 if parents’ age is above 60 years.
SECTION 80DDB: MEDICAL EXPENDITURE
Under this section one can claim deduction of Rs.40,000 incurred on medical expenditure for taxpayer and his/her spouse and children.
SECTION 80E: INTEREST ON EDUCATION LOAN
Under this section individual can claim deduction upto 8 years with no maximum limit. Apart from taxpayer self, the interest can be claimed for spouse and children.
SECTION 80EE: INTEREST ON HOME LOAN:
After utilizing the limit of Rs.2 Lakhs Under sec.24 under the head House Property, you still can claim Rs.50,000 of Interest paid on home loan. To claim deduction under section 80EE the condition is that you should not be owner of any other house property on the date the loan was sanctioned to you.
SECTION 80GG :HOUSE RENT ALLOWANCE
This section is useful for salaried person residing in the rented premises and are not receiving House Rent Allowance; the rent paid will be deductable under this section of the Income Tax Act.
These above stated deductions are most popular and safe ones in which you save tax along-with yielding nominal returns at the same time(If investment).
Now let’s learn other deductions which are little complex and requires market understandings and are bit risky for taxpayers.
These are the Equity Linked Saving Schemes directly concerned with the stock market fluctuations and are risky in nature. Thus before attracting towards this kind of tax saving fund one should gain in-depth knowledge and prediction power of stock market as the equity market is highly volatile and doesn’t promises you return on investment.
ULIP stands for Unit Linked Insurance Plan. This is the most complex and manipulating tax-saving instrument which provides insurance cover along with investment of your premium fund. This again is risky as is concerned with market volatility. One should have good market prediction ability otherwise taxpayer may end up redeeming less amount than paid as premium.
Above stated investment are not always loss-making but they are depended on market fluctuation thus requires kind attention before spending the earnings in the same.
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The author of above article is Bhavik Sindhvad.