First of all, you should plan your tax-saving investments before moving towards the financial year. With FY 2019-20 close to the end, people might have been delayed in tax planning and are expected to invest in any tax-saving mechanism just to cut the tax liability for the year.
However, lowering tax liability might not essentially need an investment to be prepared as there are several outlays which also provide you tax breaks. Moreover, one must require to be conscious of several imperative sections and possibilities of the Income Tax Act under which the tax benefits can be benefitted.
When it comes to lowering tax liability, so, Section 80D and Section 24 are convenient as well. At the same time as the former associates to a premium paid for health insurance, the last deals with a home loan.
The zones are available under Section 80C to comprise advantages for expenses acquired along with for investments prepared. The investment-associated tax breaks are only on particular investments such as five-year reported tax-saving bank deposits, life insurance premium, Employees’ Provident Fund (EPF), National Savings Certificate (NSC), Senior Citizens’ Savings Scheme (SCSS) Public Provident Fund (PPF), and Equity-linked Savings Scheme (ELSS) from mutual funds (MFs). Reimbursement of the principal on home loan and payment of tuition charges also meet the criteria for tax advantages under Section 80C.
Find out your existing Obligations
However, before you begin searching for tax-saving investments under Section 80C, perform a small workout to settle on how much you have already dedicated towards it. You might not have to make extra tax saving investment under Section 80C this year. Here’s how it is possible:
If you are a salaried person, an employee adds up to 12 percent of his basic pay for the EPF account, which meets the criteria for tax advantage under Section 80C. The company is considered to go with the employee’s lowest payment of 12 percent of the basic pay but the worker is not allowed to obtain tax benefit on it. At present, (2018-19) offerings and the balance to be paid 8.65 percent tax-free interest. The interest rate for FY 2019-20 is so far to be announced by the Labour Ministry. The employer’s involvement, 8.33 percent (on the highest salary of Rs 15,000, i.e., Rs 1,250) is unfocused towards EPS and the balance of 3.67 percent enters upon the employee’s PF account every month. Also, you need to check your (employee’s) overall contributions for the year (presumptuous basic leftovers similar) and calculate it towards Section 80C benefit.
Life insurance premium: Existing or a new obligation
Instead of age, if any individual has financial dependents and also possess life insurance is mandatory. If you by now have one, so, keeps it on the go by paying renewal premiums is untouchable. Renewal premiums also meet the criteria for tax advantage under Section 80C. If your policy falls, renew it by paying due premiums, though only if the policy is important it. You would be entitled to assert tax benefit under Section 80C on the full premium remunerated (together with the previous due premiums) subject to the bound of Rs 1.5 lakh. All life insurance schemes, together with pure term insurance, endowment, Ulips and money-back plans meet the requirements for this profit.
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Home loan principal reimbursement: Outflow
If you have already taken a home loan, the principal reimburses meet the criteria for tax advantage under Section 80C. The EMI of the home loan comprises both principal and interest. You can ask your home loan lender to release a report that claims the short-term divide of principal, interest for the full year. However, partial or full principal reimbursement done throughout the year entitles for tax benefit.
Health insurance is compulsory
It is always recommended by financial planners to start one’s financial planning procedure by purchasing a health insurance policy. Purchase sufficient coverage for a person and family members and, if already purchased, though renewal premium entitles for tax benefit under Section 80D.
Tuition fees: Outflow
Parents can also state an assumption for tuition fees for two children only within the total limit of Rs 1.5 lakh under Section 80C. However, any reimbursement towards any development charges or contribution to colleges or institutes is expelled. When both partners are taxpayers, the circumstances might be difficult. Archit Gupta, Founder and CEO, ClearTax.com, says, “Subtraction for tuition fees can be claimed by the parent who has done the payment.”
Before you consider investing in any of the Section 80C tax savers, create an estimate of your income for FY 2019-20. Find out your tax liability that should be based on the supposed yearly income. Afterwards, factor in different existing obligations as mentioned above that would get cut from the GTI. This leaves you with a lower tax liability and also provides you with a better image of how much more to spend to further get the tax burden low. Keep in mind, connect your new investments to a long-term objective and not just pay attention to reducing taxes.