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8 Ways To Save Tax In 2019-20

Taxes essentially fund a country’s development, which is why it’s our duty to pay our taxes in a timely and honest manner. If you feel burdened by taxes, it is probably because you are not aware of tax saving options provided under Income Tax Act. If you utilize these options, you can reduce your overall tax liability and increase your savings as well. Some popular options to save tax include life insurance, health insurance, ULIP, fixed deposit, tax saving SIP, PPF, National Saving Certificate (NSC), etc.

The type of investments you choose to save tax will depend on your income and existing financial needs. You need to follow a balanced approach, i.e. optimize your tax savings without creating a shortage of funds for your existing financial needs. If you are looking for the best investment plan to save tax in 2019-20, here are some safe and reliable options that you can consider.

  1. Unit Linked Insurance Plan (ULIP): This helps you achieve the twin objectives of wealth creation and getting a life insurance cover. ULIP is a good option if you have long term goals such as children’s education, retirement planning, buying a home, etc. Tax benefits for ULIP premiums are available under Section 80C, wherein you can claim deduction of up to Rs 1.5 lakh. Another benefit is that you do not have to pay any taxes on returns that you get on maturity of policy. This exemption is available under Section 10(10D) of the Income-tax Act.
  2. Life insurance: This is a must if you want to secure the financial future of your loved ones. People with dependents such as parents, spouse and children should definitely consider life insurance. The premiums you pay for life insurance can be claimed as deduction under Section 80C up to a maximum of Rs 1.5 lakh per year. Returns on maturity and sum assured paid to the nominee are also tax free under Section 10(10D).
  3. Health insurance: This is necessary if you want to ensure proper medical care and treatment for yourself and your loved ones. The premium you pay for health insurance can be claimed as deduction under Section 80D. The max limit per year is Rs 25,000 for adults and Rs 50,000 for people above 60 years of age.
  4. PPF: Under Public Provident Fund (PPF), you can claim deduction of Rs 1.5 lakh every year. This deduction is available under Section 80C. PPF currently offers attractive interest rate of 7.9 percent. Moreover, you do not have to pay any tax on interest earned on PPF. You can vary your investment in PPF in the range of Rs 500 to Rs 1.5 lakh in a financial year.
  5. Tax saving fixed deposit:This offers tax deduction of up to Rs 1,50,000 under Section 80C of Income Tax Act. Current rate of interest is in the range of 5.5% – 7.75%, depending on the bank you choose. Tax-saving fixed deposits are usually for a term of five years. The interest you earn is taxable.
  6. Equity-linked savings schemes (ELSS): This is also covered under Section 80C and you can claim deduction of up to Rs 1.5 lakh. If market conditions are buoyant, you can earn more money with ELSS, as compared to PPF, NSC, fixed deposit, etc. The income you earn from ELSS is partially taxable.
  7. National Savings Certificate (NSC): This is quite similar to tax saving fixed deposit that has lock-in period of five years and interest earned is taxable. Investments in NSC qualify for deduction under Section 80C for a maximum of Rs 1.5 lakh.
  8. National Pension Scheme (NPS):This is a great way to secure your retirement days. You can claim deduction of up to Rs 2 lakh every year, which is available under Section 80CCD. Any payments received from NPS are taxable, but if you reinvest that amount in any annuity plan, you can claim full tax exemption.

It’s better to invest in tax saving products, as they reduce your net payable tax, boost your savings and secure your financial future. You can invest in many of these schemes online by making payments via your bank. It just takes a few minutes and the benefits you get are simply unparalleled. Investing in tax saving products is the best way to boost your finances and contribute to the country’s development.

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