With the new financial year around the corner, taxpayers begin to focus on their tax planning. Section 80 of the Income Tax Act, 1961 provides several beneficial ways through which taxpayers can reduce their tax liabilities.
Here are some helpful ways to reduce your tax liability. These guidelines will also help to significantly increase your savings.
- Deductions under Section 80C
This section mainly pertains to the provision of deductions to taxpayers investing in certain types of investment avenues. These include fixed deposits for 5 years, employer provident funds, pension plans, public provident funds, and other national pension systems. The current tax benefit available under this section is up to INR 1.5 lacs during the year.
- Using the NPS Tax Benefit
The new national pension scheme (NPS) is new kind of national pension system available for taxpayers in the government as well as the private sectors. In 2009, the government launched this scheme, which is mandatory for state and central government employees. It is also extended the benefit to private sector employees with the objective of improving saving habits among individuals. The NPS tax benefit available is INR 50,000 under section 80CCD of the Income Tax Act.
Combining the two sections above, taxpayers can now claim tax deductions on up to INR 2 lacs (INR 1.5 lacs under sec 80C and INR 50,000 as NPS tax benefit under sec 80CCD). Further, if employers contribute to the NPS on behalf of employees, additional tax deductions are available under sec 80CCD (2).
There are several national pension system calculators that are available online, to better understand possible tax savings using this plan. One such easy to use calculator is available on the Kotak Mahindra bank site.
- Medical Insurance
Another one of the tax saving schemes available is through medical insurance plans. Premiums up to an amount of INR 25,000 can be used as tax deductibles, under section 80D. For senior taxpayers, the limit is set at INR 30,000.
An additional tax deduction of up to INR 80,000 per assessment year is available for taxpayers who incur expenses taking care of disabled individuals.
- Higher education
An amount of INR 1 lac can be deducted from your income tax liability under section 80E for repaying loans availed for higher education.
These tax benefits will allow you to put aside more funds for investments, thus giving you even greater returns. If you need more information and assistance with tax saving schemes, consult a financial advisor or read the detailed tax saving faq.
