Your work might make you happy. It might be a happy culmination of all the correct decisions you have taken in life – right from scoring well in your 10th boards or burning the midnight lamp during college! Or, you may be part of the majority populace who has to do a job to earn his/her corns, without being too interested in the profession.
Whatever be the case, it is hard work – toiling away week after week, in anticipation of your next vacation and saving up for it.
And then you groan and curse in irritation and disbelief when you see the never-ending deductions column on your paycheck at the end of every month, where a significant proportion of your gross income gets eaten away as Tax Deducted at Source (TDS), other taxes [you did not even know existed], employee benefits, cesses and the like.
Let’s face it, who here like paying taxes? Truly no one. Which is why, the government has kept in place certain provisions for the salaried class to save on taxes. By investing in Income Tax saving schemes, you can get deductions and exemptions under Section 80C of the Income Tax Act.
Let’s have a look at the options here.
A. Investment in Public Provident Funds
The good old PPFs are still an attractive instrument to save on taxes. PPFs or Public Provident Funds, backed by the Government of India, have always been considered the gold standard of investing, by our parents.
And with good reason!
Deposits made in a PPF account are eligible for tax deductions! More so, the interest earned on them is tax-free as well.
Your minimum investment can be as low as Rs 500 and increase up to Rs 1.5 lakhs. Moreover, you earn an interest of 8.0% per annum on your deposits as well!
PPF accounts usually have a lock-in period of 15 years, but if you wish, you can extend it by 5 more years. However, you can withdraw money only partically, and that too once the tenure is half done i.e. after 7 years.
With PPFs, you get to escape taxes along with a fair return on your investments. Fair deal, right?
B. Investments in National Savings Certificate (NSC)
Another fantastic Indian government scheme for you to invest in and save on your taxes.
National Savings Certificates, as the name suggests, is designed to inculcate a habit of savings amongst all of us. An essential habit, considering that the temptation to splurge is just a click away for most of us.
You can buy this savings bond if you wish to save taxes, save money and have a decent investment as well.
NSCs are low risk in nature. You can invest in as many NSCs as you want, but you will only get tax exemptions up to a limit of Rs 1.5 lakhs. You also get to earn a compound interest of 7.6% per annum on your savings. Compared to PPFs, which have a rigid lock-in period, NSCs have two maturity period, at the end of 5 years and 10 years.
If you choose to invest in NSCs, you can achieve your dual objective of saving a sizeable amount of money as well as cutting down on your taxes, at the same time.
C. Investment in 5 years fixed deposits (FD)
Another product from the bygone era? If that’s what you thought, reconsider it.
Some fixed deposits (FDs) can help you in saving your hard earned money from extra taxes! These FDs are no different from regular FDs, except that they have a lock-in period of 5 years.
Deposits up to Rs 1.5 lakhs are exempted from taxation. So, you can start with a minimum amount of Rs 1,000 and earn an interest between 5-7% with ease.
However, a word of caution. The interest you earn on these FDs is not free from tax. So, you will have to pay taxes, on not your deposits, but on the interest received. Nevertheless, they are a great option for tax saving, along with building a good financial corpus.
D. Home Loan
If you are dreaming of buying your own sweet home for a while now, it’s time to make that a reality. You can earn a variety of tax exemptions on your home loan.
Some of them are-
1. The Principal portion of the EMI you pay for a year is allowed as a deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh.
2. As for the interest portion, that is tax deductible too. The interest portion of the EMI paid for the year can be claimed as a deduction from your total income up to a maximum of Rs 2 lakh.
3. If you’re buying a house for the first time, you get additional benefits. You can avail additional deduction under Section 80EE up to a limit of Rs 50,000. However, for this, the amount of loan you take should be less than Rs 35,00,000 and the value of your property should not be more than Rs 50,00,000.
E. Life Insurance
Having a life insurance has dual benefits!
Apart from providing a life cover to you, it can also help you in saving on taxes.
Here are a few pointers you need to keep in mind before you go ahead with it.
1. The maximum amount that can be exempted from taxation is Rs. 1,50,000.
2. Tax deductions in a financial year are allowed for premiums that are up to 10% of the actual sum assured.
Use Sqrrl’s Axe Tax to help you make the best tax-saving investments. It’s easy and convenient and with a few simple clicks, you will be well on your way to retain a large portion of your earnings.
Go ahead, and start saving your hard earned money from the clutches of taxation. Axe the Tax today!