Tax saving and tax planning are very important
parts of financial planning. People are constantly in search of new ways to
save income tax. The Income Tax department too has made a lot of provisions for
the taxpayer to save his income tax by putting a part of his/her income into
various schemes. The returns from these schemes and policies are completely
free of tax.
As per the section 80C of the Income Tax Act, an
individual can claim up to Rs. 1, 50,000 from his or her taxable income as a
deduction. Deductions are provisions created by the government to help
taxpaying citizen save their money. However, these deductions have to be put to
good use, which means, this amount must be invested in tax savings plans, life
insurance policies or endowment
policies. Under this section, you can also claim deductions for tuition
fees for education, for medical expenses incurred or even for the payment of
the principle amount of your home loan or the stamp duty and registration
charges incurred while buying a new home.
If you’re new at this whole taxpaying and saving
game, here’s a guide for you to make a tax saving plan that will ensure maximum
returns.
1. Life Insurance Policy: Life insurance policies are an investment
everyone should make. It is the first step to your financial planning. It
should be treated more as an investment than an insurance policy. At the end of
the term the payout that you received from your life insurance company
and the premium that you pay them is completely tax free.
2. Public Provident Fund: This fund provides maximum tax saving benefit
for the people. The interest rates are updated by the government on a yearly
basis. Most banks offer a PPF facility for its customers. This scheme ensures
maximum tax saving benefit for its users. At the moment the government allows
around 8% interest on PPF.
3. Five- Year Fixed
Deposits: Banks offer fixed deposits
that provide tax benefits. These deposits are exempted under Section 80C and
they have a lock in period of five years.
