With less than ten days left for the financial year 2016-17 to end, the rush to save tax is nearing its natural epitome. Not so much for salaried individuals as they are expected to have done their bit by now (thanks to the regular reminders by account office), it's the non-salaried individuals who could still be scurrying around to find the right tax saver.
For anyone looking for a tax-saver at this fag end of the tax saving season, the probability of committing errors are more. The chances of locking funds in an unsuitable tax saving investment are quite high. Tax-saving investment should never be made on an ad-hoc basis or for an ill-conceived goal.
Still, if you are one of those waiting for the last-minute tax planning, here are few important things to look at.
While choosing the right tax-saver, base your decision on these five important things, among others:
* Total amount of deductions - See how much maximum you can avail
* Existing commitments - See if any fresh investment is required or not
* Types of tax-saving instrument - See what suits you
* Tenure of the investment - See if the tax saver can help you meet your goal
* Taxability of income from the investment - See the post-tax return based on your income slab
Once you have got a fix on these, equally important is to choose a tax-saving instrument which can be linked to a specific goal.
Total amount of deductions
Section 80C allows deduction from gross total income (before arriving at taxable income) of up to Rs 1.5 lakh per annum on one or more eligible investments and specified expenses. The eligible investments include life insurance, Equity Linked Savings Schemes (ELSS) mutual funds, Public Provident Fund (PPF), National Savings Certificate (NSC), etc., while expenses and outflows can include tuition fees, principal repayment of home loan, among others.
If you have exhausted your annual limit Sec 80C limit of Rs 1.5 lakh, you can also look at National Pension System (NPS) to save towards retirement and, in the process, save additional tax.
From 2015-16 onwards, an additional (additional to Section 80C) deduction of up to Rs 50,000 under Section 80CCD (1b) for investment in NPS is also possible. For someone in the highest 30 per cent income tax bracket, it's an additional annual saving of about Rs 15,000.
Further, the premium paid towards a health insurance plan for self and family members qualifies for tax benefit under Section 80D for Rs 25,000 and Rs 30,000 for those above 60. If one has a home loan, interest payments made towards its repayment can also be claimed under Section 24 of the Income Tax Act. The other deductions include donations under Section 80G, interest payments under Section 80E for education loan, etc.
New Courtesy - Economic Times
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