Investing in a tax saving instrument is the easiest and most popular way to save income tax. Section 80C of the Income Tax Act, 1961 gives information about the schemes in which an income tax payer can get tax exemption by investing.
New Delhi. There are many ways a salaried person can apply for income tax. These tax saving tools, if used in a planned manner, go a long way in saving an income tax payer’s money. But, the plan to save income tax should be made at the beginning of the financial year itself, only then it becomes a matter. If you do tax planning at the end of the year, then you will not get much success. Therefore, one should invest in tax saving schemes at the beginning of the financial year itself.
According to a Live Mint report, Vijay Singhania, CEO, TradeSmart, says that investing in a tax saving instrument is the easiest and most popular way to save income tax. Section 80C of the Income Tax Act, 1961 provides information about the schemes in which an income tax payer can get tax exemption by investing. Singhania says that an income tax payer Employees Provident Fund (EPF), Public Provident Fund (PPF), Fixed Deposits with minimum tenure of 5 years or more, Life Insurance policies, ELSS Mutual Funds, National Pension Scheme (NPS) and One can save tax by investing in other pension plans.
Singhania says that for paying income tax, now one has to choose between the old tax system and the new tax system. If the income tax payer pays income tax by adopting the old tax regime, then he can get tax exemption on investments up to Rs 1.50 lakh. If a tax payer chooses the new tax regime to pay income tax, then he does not get this exemption, because the income tax rates are lower in the new tax regime.
Public Provident Fund (PPF)
The best government scheme to save income tax is considered to be PPF (Public Provident Fund). You can invest up to Rs 1.5 lakh annually in PPF. In this, income tax exemption is available on investment under section 80C. The government guarantees investment in PPF, that is, the money will not sink.
National Pension Scheme (NPS)
This is a government retirement savings scheme. Under Section 80C of the Income Tax Act, in addition to Rs 1.5 lakh in tax, a profit of Rs 50,000 can be invested in it. You can start investing in it from Rs 1,000 a month. Any Indian between the age of 18 to 65 years can open an account in this scheme.
Tax saving exemption is available on investment in Unit Linked Insurance Plans (ULIPs). There will be no tax exemption on premium going in ULIPs above Rs 2.5 lakh. As per the existing income tax laws, maturity income of life insurance policies is exempt from tax under section 10(10D).
Fixed Deposit (Tax Saving FD)
You can save income tax by investing in tax saving fixed deposits. Investment in tax saving FD is locked for 5 years. Tax saving FD interest rates change from time to time. Tax saving FD investment is a safe and guaranteed return option. You can avail tax exemption under 80C on FDs up to Rs 1.5 lakh per annum.
Equity Linked Savings Scheme (ELSS)
Equity Linked Savings Scheme (ELSS) is a type of equity fund and is the only mutual fund that offers tax exemption of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Returns/Profits up to Rs 1 lakh per annum in ELSS are not taxable.