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Tax saving checklist you must follow this financial year

Tax saving checklist you must follow this financial year

Tax saving

The month of March is a busy one both for taxpayers as well as financial institutions as everyone hurries to make last minute investments in order to save Income Tax. However, in the view of the whole country under lockdown due to the Coronavirus crisis, the last date for filing taxes has been extended to June 30 by the government.

This is opposed to March 31, which is usually earmarked as the deadline to be through with your tax-saving investments for the financial year. However, even with this breather, there is only a month left for you to furnish your tax return. So, if you are looking for assistance, here is a tax-saving checklist to guide you properly and help you claim relief from Income Tax.

Save up to Rs 1.5 lakh under Section 80C, 80CCC and 80CCD(1)

Investments made by you in the schemes below during financial year 2019-2020 less than or equal to Rs 1.5 lakh can help you claim an Income tax deduction. Here are a few:

  • Employee Provident Fund( EPF) contribution
  • Public Provident Fund(PPF) investment
  • Money invested in National Pension Scheme
  • Amount deposited in Sukanya Samriddhi Scheme for your daughter
  • Life insurance premium paid by you to keep policy in force
  • 5 year tax-saving fixed deposits of a bank or post office
  • Contribution made towards Post office Senior citizen saving scheme
  • Tution fees paid for your children’s education

Additional deduction for NPS subscribers:

While the majority of taxpayers utilise the deductions above to the maximum in their tax-saving checklist , NPS subscribers holding a Tier-I account have the advantage to claim upto Rs 50,000 beyond the 1.5 lakh limit as specified above.

Health insurance premiums:

If you have purchased a health insurance plan for you or your family, you are eligible to claim deduction according to Section 80D, which is not to be missed on your tax-saving checklist . A maximum amount of Rs 25,000 is allowed as exemption for you, your spouse and children collectively, while you can also claim a similar amount towards both or either of your parents health policy. All of you should be below 60 years of age in this case. However, you can claim up to Rs 50,000 for your spouse, children and yourself if you are above the age of 60. Similarly, for both parents aged 60 and above, a maximum of Rs 50,000 paid as health insurance premium can be claimed.

Education loan interest

Section 80E allows you to save tax on the interest paid towards an education loan taken for yourself, your spouse or your children. This can be availed upto 8 years starting from the year when you start repaying the interest or till it is repaid, the earlier of either.

Home loan interest

Starting FY 2019-20 if you have taken a home loan from a bank or financial institution between April 1 2019 and March 31 2020, you are eligible for tax benefit on interest up to Rs 1.5 lakh according to Section 80EEA. This is over and above Rs 2 lakh tax rebate already available on interest repayments as per Section 24b of Income Tax. However, before you tick it off your tax-saving checklist, you need to keep a few things in mind:

  • The value of the stamp duty paid on the property for which the loan is taken should be below Rs 45 Lakhs
  • You should not own any other residential property apart from the one for which the loan has been sanctioned
  • You can claim tax benefits starting 1 April 2020 till the time you complete all the instalments of your home loan

Loan for Up to Rs 1.5 lakh can be saved in tax if you taken a loan to purchase an electric vehicle anytime during the last financial year

Donations made to charities are exempted as per Section 80G. These need to be made in cash if below Rs 2000 and in any other mode apart from cash if above this amount to claim a deduction

Interest of up to Rs 10,000 earned by your savings account does not attract any tax

An individual who is blind or mentally retarded can claim Rs 75,000 as a deduction while the limit increases to Rs 1.25 lakh for severely disabled people.

Now that you have a handy tax-saving checklist in place, you can easily calculate your tax liability and complete tax filing before time. However, if you have still not made investments to make you eligible for deductions, consider the iSelect Star Term Plan from Canara HSBC Oriental Bank of Commerce Life Insurance that offers life cover along with flexible premium payment and benefit options to suit your needs.

Opt for increasing cover with age, add your spouse on discounted rates and opt for accidental death benefit or child support benefit to make sure your family is financially independent at every stage of their life even in your absence. iSelect Star term plan offers you value for money with a plethora of advantages to ensure that you steer your loved ones into a secure future so that they can live their dreams and realise their goals without any interruptions.

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Annual Income (In Lacs)

FAQs Related to Tax Saving

First of all, your gross total income is taken into account and all applicable deductions/exemptions are deducted out of it, the resultant amount is the net income, upon which the Income Tax is calculated, on the basis of income tax slabs that are announced each year in the Union Budget.

How much tax you can save depends on your financial portfolio and profile. The most common avenue for tax-saving is Section 80C, which allows you deductions up to Rs 1.5 lakh in your taxable income. The implication is that you can save up to Rs 46,800*in taxes in a year, depending upon the income tax slab you belong to. Similarly, other avenues like interest on loans, health insurance etc also provide deductions capped at a certain amount.

*Tax saving of Rs.46,800/- is calculated at the highest tax slab of 31.2% (including 4% Cess) for an individual assessee on life insurance premium of Rs.1.5 lakh, who is having taxable income upto Rs.50 lakhs.

You can choose from many investments that are tax-exempt: not an exhaustive list, but includes Equity Linked Saving Scheme (ELSS), Public Provident Fund (PPF), life insurance plans, Unit Linked Insurance Plans (ULIPs), Sukanya Samriddhi Yojana, Senior citizens Savings scheme, National Pension Scheme (NPS), tax-saving bank FDs.

First of all, make investment of Rs 1.5 lakh in investments instruments covered under Sections 80C to reduce your taxable income. Claim deductions for the interests paid on home loan and/or education loan if any. Get a health insurance policy and claim for other medical expenditure like preventive medical healthcare check-up, expenditure on rehabilitation of handicapped dependent relative, among others. Mainly, the idea should be finding out which tax saving avenues fit well with your larger financial goals and invest in them!

The maximum limit of investment that will reap the benefits of deduction from taxable income under Section 80C is Rs 1.5 lakh.

There is no limit to the number of tax-exempt investments one can have in a financial portfolio. However, it is important to note that there is a limit to how useful any instrument can be for the purpose. This is because the amount of deduction that can be claimed for specific instruments is capped at a maximum value. At the same time, keep your financial portfolio balanced so that it also provides safety, returns and liquidity.

First of all, make use of the Rs 1.5 lakh deduction allowed under Section 80C. This can be done by making investments in life insurance premium, Equity Linked Saving Scheme (ELSS), Public Provident Fund (PPF), Unit Linked Insurance Plans (ULIPs), Sukanya Samriddhi Yojana, Senior citizens Savings scheme, National Pension Scheme (NPS), among others.

Second, make use of the deductions available in respect of health insurance and other medical expenses. Under Section 80D of the Income Tax Act, 1961, a deduction of up to Rs 25,000 is allowed in a year in terms of the premium paid towards a health insurance policy of Self and your family i.e., Spouse and children. This can include preventive healthcare check-ups too upto Rs 5000/-. Under section 80D you can also claim additional deduction upto Rs. 25000/- (Rs. 50000 in case of senior Citizen) for health insurance of your parents.

Apart from Section 80C, various deductions and exemptions has been provided under the provision of Income Tax Act, 1961 like deduction under section 80D can be claimed for the payment of health insurance, deduction upto Rs 50,000 on home loan interest under Section 80EE. Any donations you make to charitable institutions are also allowed as deduction under Section 80G, subject to condition prescribed therein.

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