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5 Tax Saving Rules You Must Know
SAHU & ASSOCIATES:We want our investments to give good returns. We worry that together with inflation, tax payments will erase most of our gains.
However, the government is considerate of these worries. It has put in place investment instruments that will are exempt from taxation. However, the IT Act limits the tax rebate on such investments to Rs 1,20,000. Nevertheless, this helps bring down overall taxable income by a significant amount.
Here are 5 tax-saving options:
1) Section 80C: This section of the Income Tax Act mentions various tax-saving schemes. However, it imposes a limit of Rs 1 lakh every financial year. Some of the schemes mentioned are -
a. Public Provident Fund (PPF) a low-risk, long-term savings instrument operated by the government of India;
b. Employee's Provident Fund (EPF), a mandatory retirement planning fund where every employed individual has to save minimum 12% of his/her basic salary;
c. Equity-Linked Saving Scheme (ELSS), diversified equity mutual funds where investors enjoy both tax rebates as well as an appreciation of capital;
d. Unit-linked Insurance Plans (ULIPs), an insurance-cum-investment product;
e. National Savings Certificate (NSC), a 5-year or 10-year savings bond offered by the Department of Post;
f. Infrastructure bonds, long-term bonds issued by the RBI facilitating investment in infrastructure projects offering tax rebate upto Rs 20,000;
g. Long-term bank deposits with government-owned Scheduled banks upto Rs 1 lakh per year. However, interest accrued is not exempted from tax.
2) Section 80D: This section offers tax benefits on the premiums you pay for your medical insurance upto Rs 15,000. Any amount paid for medical treatment of certain diseases also can get you a tax rebate of upto Rs 40,000, or Rs 60,000 if you are a senior citizen.
3) Section 80E: Interest paid on education loans can be deducted from your tax liabilities as per Section 80E of the Income Tax Act. However, this is valid only for the first 8 years of the loan.
4) Section 24: You can deduct Rs 1.5 lakh for the interest amount on your loans for a self-occupied house. If the house is rented out, then the tax deduction will be equivalent to the actual interest being paid every year.
5) Section 80T: This section was introduced in the 2012-13 budget. According to this, total interest income from all savings accounts up to Rs 10,000 are eligible for tax deduction.