It’s only when the time to pay income tax knocks on the door that some of us start looking at various ways to save money. Sometimes, it would be a little too late, and we’d end up having to pay the tax instead of investing for the future.
Imagine how good it would be if we started a bit early. Instead of focusing on tax saving at the last minute, why not start tax planning. Surely, that would give us more options to make a proper and well-thought-out investment. Wouldn’t that be a bonus?
Section 80C, 80D, and 24 are three major sections where you can tax benefit if you have made the right investment. While Section 24 deals with house loans, 80C and 80D are related to insurance and other investments. You can get tax benefit up to Rs. 1 lac for loan repayment under Section 80C while you get up to Rs. 1.5 lac under Section 24.
Insurance
Investing in insurance has double benefits. It not only saves you tax money but also provides financial protection for your family.
There are many ways you can invest in insurance. ULIPs (Unit Linked Insurance Plan), life insurance policies, term insurance, and health insurance are some options to choose from.
You can get up to Rs. 1.5 lac tax benefit under Section 80C by investing in insurance and getting a life cover for a considerable period. Most insurance policies are for the long term with annual renewals.
Equity Linked Savings Scheme (ELSS)
ELSS tax benefit scheme comes with a lock-in period of 3 years. The best part about ELSS is the returns it provides. The three years make it possible to reduce the risk of market volatility and generate more returns to the investor.
SIP is a comfortable and suitable method to invest in ELSS. It allows you to calculate how much you can invest each month so that your finances will not be affected. You spend the same amount every month. The number of units you buy depends on the market condition.
Post Office Fixed Deposit
Post Office FD is one of the safest ways to make a long-term investment. With a minimum lock-in period of 5 years, you can invest as much as you want.
The minimum required amount for deposit is Rs. 200/-. And you get the interest at the rate of 8.5% P.A. If safety and long-term are your aim, go for PO FD.
Tax Saving Fixed Deposit
These are bank instruments exclusively designed for tax benefits. With a 5-year lock-in period, you can invest around Rs. 1 lac to Rs. 1.5 lac and get a tax benefit under Section 80C.
The same section is applicable for PO FDs as well. If you don’t wish to risk investing in equity funds, a tax-saving fixed deposit from your bank is a good choice.
The Income Tax Act allows you to get legal tax benefits and save money by making a few wise investments. It’s all about making the right decision.