Indian taxpayers can take advantage of a wide variety of tax breaks provided under the country’s income tax system. You can lower your taxable income by investing your money in some long-term programs. Family-essential expenses like top-up medical insurance can save you taxes.
Starting with the 2020–21 fiscal year, taxpayers will have the option to select between the current or old tax regime or the new concessional one. Under each system, a different percentage of a specific tax slab’s value is due.
The only way to think about investments that reduce your taxable income was under the old tax structure. Nevertheless, the investments that help you save taxes in the long run also help you develop wealth in the long run. If you’re looking to increase your wealth now and, in the future, most of these investments are solid choices like top-up health insurance investment is one of the best. We need to learn how business owners and salaried workers may save money on taxes.
Invest in health insurance
Comprehensive health insurance like top-up medical insurance protects your health and reduces taxes. Individual, spouse, child, and parent health insurance premiums are deductible under Section 80D of the Income Tax Act. The provision promotes health and lowers taxes. To choose a health insurance like top-up health insurance policy that maximises Section 80D tax savings, assess your family’s healthcare needs.
Savings Plan with Equity Investment
This particular mutual fund has a 3-year lock-in term. Under Section 80C of the Income Tax Act, it is the sole type of mutual fund in India that is eligible for a tax deduction.
Because ELSS mostly invests in stock markets, the returns it provides are higher than those of other tax-saving plans over the long term. You can invest all at once or use the systematic investment plan (SIP) approach. The three-year lock-in term, however, prevents you from accessing your funds until it expires.
The element of danger is crucial to remember in this context. Putting money into the stock market comes with the possibility of a significant degree of risk. However, if you stick with it, it can end up being a fantastic choice.
Pension Fund for the Public
A government savings plan with 15 years is the Public Provident Fund. Nearly every bank and post office in India offers a standard income tax savings scheme. Its quarterly rates are subject to change. The present PPF interest rate is 7.1%, as stated in the circular.
Profits from a PPF do not incur taxes. It follows that a minimum investment of Rs. 500 is required to start a PPF account, with a maximum investment of Rs. 1.5 lakh every fiscal year.
National Savings Certificate
Another major method of reducing taxable income is the 5-year National Savings Certificate, which pays interest at a fixed rate of 7.7 per cent per year.
You can claim up to Rs 1.5 lakh as a tax rebate under Section 80C for the interest you earn on your NSC, which is a tax-saving option.
Fixed Deposit Accounts (FDs) with tax advantages
You can save a lot of money on taxes by investing in FDs. So, with 5-year tax-saver FDs, for instance, you can get a tax break of up to 1.5 lakh rupees. Nevertheless, investors are subject to taxation on the interest they earn from fixed-term deposits (FDs) at a rate that varies according to their tax band but is now between 7-8%.
Scheme for Savings by Senior Citizens
With SCSS, you can put your money to work for you while reducing your taxable income in the long run. Anyone over the age of 60 can take advantage of it, and it lasts for five years. It has a tax rate of 8.2%. A maximum tax deduction of 1.5 lakh rupees is available under this plan.
Employees’ Retirement Plan
In particular, paid workers can take advantage of the EPF’s retirement benefits system. Employers are required to withhold 12% of both the basic wage and Dearness Allowance (DA) by the EPF Act. Put this money into a provident fund system that the government has approved.
As with many common tax-saving plans, this one counts the deduction towards the Rs 1.5 lakh limit under Section 80C.
Pay off your home loan
Section 80C allows borrowers to deduct a portion of their EMI payments that go towards paying off the principal of their house loan. On the other hand, interest payments are not deductible.
Fees for tuition
Only single parents or legal guardians with no more than two dependent children may take advantage of this tax break. You can claim tuition expenses for your child’s schooling up to Rs. 1.5 lakh as a tax deduction. This deduction is also independent of the child’s socioeconomic status. Still, the kid must be a full-time student at an Indian school, college, or university for the academic programme to be valid.
Conclusion:
Finally, smart financial strategies and deductions help reduce Indian taxpayers’ income tax liability. Top-up medical insurance premiums provide financial security and tax benefits through this method. Understanding the Income Tax Act and investing wisely helps optimise tax-saving strategies. Consult a financial professional to tailor these methods to your needs. Remember that proactive tax planning saves money and improves finances.
Also Read:- Know Your Plans: Top Up Health Insurance V/S Normal Health Insurance
