The last round of the financial year 2020-21 has started. In such a situation, when you are filing your income tax return, then you should think about tax savings.
Exemption under 80C
Under Section 80C of the Income Tax Act, the government exempts tax on investments up to Rs 1,50,000. See following
- Tax exemption for children’s education
The tuition fees paid under the tuition fees of the children are covered under the tax saving under Section 80C of the Income Tax.
- Tax exemption on the principal of the home loan
If you have taken a home loan to buy or build a house and are paying it in EMI, then you will get benefit in tax saving. This is because the principal amount in the home loan is tax free under the 80C section principal.
- Public Provident Fund (PPF)
Interest is also available in Public Provident Fund (PPF). Also, the entire investment made in it is tax free. The PPF account earns an interest of 7.6 per cent on an annual basis. The interest received is also tax free. The amount received at maturity is also completely tax free.
- Employees Provident Fund (EPF)
The amount of EPF comes under tax saving.
- Equity Linked Savings Scheme
There are plans to invest in ELSS mutual funds. Its main objective is to save tax and provide good returns. Despite imposing a long-term capital gains tax on returns from April 1, 2018, this investment is good in terms of returns. Only profit of more than one lakh from ELSS will be taxable under LTCG tax.
- Senior Citizen Saving Scheme
The Senior Citizen Saving Scheme is currently receiving interest at the rate of 8.7 per cent. The investment made in this scheme is subject to tax exemption under Section 80C of the Income Tax Act, 1961.
- Five year FD in bank
The Fixed Deposit Scheme (FD) is the oldest and most considered investment scheme. Banks are currently paying interest between 4.5% and 7.5% per annum on this. Tax is to be paid on interest received from FD. If you are investing in FD to save tax, then you will have to invest for a lock-in period of 5 years. You will not be able to avail tax exemption on short-term investment. Many banks provide online facility for tax saving FD. After maturity, the amount gets directly into your bank account.
One can get tax rebate on the premium being paid every year.
- Stamp Duty
Tax rebate of up to Rs 1.5 lakh can also be taken under Section 80C on stamp duty and registration charge for buying a house.
Other Exemption (based on investment or expenditure incurred)
- You can invest 50000 in NPS and get a rebate
Under Section 80 CCD (1B) of the Income Tax, a taxpayer can claim tax exemption on investments up to Rs 50,000. That is, you are getting a rebate on investment of Rs 1.5 lakh under 80C and if you also invest in NPS, then you can claim tax deduction on Rs 2 lakh.
- Education Loan
Income tax is under section 80E of the Act and is applicable to loans taken in any amount.
- Health checkup discount
Bills up to Rs 5 thousand for preventive health check-up are tax exempt.
- Health Insurance
Under Section 80D of the Income Tax Act, 1961, you can get a tax exemption of up to Rs 25,000 on all health insurance premiums paid for yourself, your spouse and children. You can claim income tax exemption up to Rs 25,000 separately on the premium of a health policy purchased for parents below 60 years of age. If your parents are senior citizens, then you can claim a rebate of up to Rs 50,000 on this item.
- Home loan interest
According to section 24 you get a discount on the interest to be paid on the home loan. The maximum discount on home loan interest is Rs 2 lakh.