While we are all keen to do our bit and contribute towards better infrastructure and upliftment of society through the taxes we pay, given that we work very hard for our salaries, it is fair that we want to keep taxes at the minimum - within approved government guidelines of course. The most common way to slow the bleed of income tax is to invest in tax saving options under section 80CC.
This means investing smart so that you can provide proof of investments to your office accountant who will then adjust your tax deducted at source. Wouldn't it be nice to take home a few extra thousands a month with no guilt? Read on to understand how you can save tax under section 80CC.
Investments of up to Rs 250,000 are eligible for deductions under section 80CC. If you are looking for tax saving under section 80CC, it is a good idea to put aside some of your earnings for investment in ULIPs. The Invest 4G plan by Canara HSBC Oriental Bank of Commerce Life Insurance, for example, not only provides tax benefits but also enables savings while also providing insurance cover. The reason why ULIPs and specifically this option is popular is because of the triple benefit. Moreover the Invest 4G plan by Canara HSBC Oriental Bank of Commerce Life Insurance can be undertaken online even right now amidst the lockdown.
Another popular option for saving tax under 80CC is ELSS or Tax Saving Mutual Funds. Be sure to read the document carefully to be sure that your chosen mutual fund is indeed tax friendly. ELSS enjoys popularity because it has a comparatively low lock-in period of 3 years.
Fixed deposits remain popular in India on account of the fact that they are viewed as safer and more dependable than other types of investments. Although the interest rates do not match up with inflation rates, many people find the fixed rate of interest and the safety of their capital to be comforting and dependable. The difference between regular and tax-saving fixed deposits is only the lock-in period which is 5 years for the tax-saving alternative versus 3 years for the vanilla alternative.
Public Provident Fund and National Pension Scheme are government-sponsored schemes. Both alternatives offer investors deductions under 80CC. However fewer people- especially fewer young Indians - invest in these schemes because they are often daunted by the long lock-in periods. The lock-in period for PPF is 15 years although a partial amount can be withdrawn after 7 years. For NPS the lock-in period is until the investor turns 60 years old and not even then can the whole amount be withdrawn- 40% stays in for partial withdrawal annually.
Monthly outgoings that never seem to cease such as repayment of your home loan and paying your kids' tutors are agreeably burdensome but on the bright side, you can claim tax benefits against these payments.
It is most advisable to consider certain realities when investing to save tax. One, you want a somewhat low lock-in period. Two, it makes sense - since these are investments at the end of the day - to pick an option that allows you to take home a good return on your investment. Be sure to choose after careful consideration.
*There is no such Section 80CC. It has been omitted.
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