Short-term investment schemes such as NSC, FD, Kisan Vikas Patra are popular among the workers in organized as well as unorganised sectors. Apart from these, there are medium and long term savings schemes such as PPF, NPS, which are exempted under section 80C of income tax. While there are some schemes that can save you from tax heat under Section 80CCD1 (B), 80D and 24 (B). In all these schemes, the maximum investment or tax exemption limit is fixed and there are different tax saving opportunities for individual tax slabs.
1. Save maximum under Section 80C
Under section 80C, you can save tax on investment of up to Rs 1.5 lakh maximum. If your annual income is Rs 7 lakh and if you have invested a maximum of 1.5 lakh rupees, then your income will be calculated as tax of Rs 5.5 lakh according to your tax calculation. Also to note that the government has given a complete rebate to taxable income up to Rs 5 lakhs, so the taxable income will be Rs 50,000 in this case.
In this case your tax liability will be reduced. It includes PPF, NSC, Five Year FD, Five Year NSC, Senior Citizen Savings Scheme, Sukanya Yojna. Children’s tuition fees and the principle of home loan are also exempted under this section. Insurance Pension Plan Section 80CCCC, NPS Section 80CCD (1) also fall under this and you can get a tax rebate of Rs 30,000 to Rs 40,000 for these plans.
2. Health Insurance: Safety and Savings
Premiums paid on health insurance can save your tax along with the security it provides. Under section 80D of income tax law, you can claim your insurance premiums. You can claim a tax exemption on your own, with children or spouse, also taking health insurance for parents. There is a tax exemption on a premium of up to Rs 25,000 for a person below 60 years of age. An additional tax deduction of Rs 30,000 for health insurance is available for parents of over 60 years of age.
Even if you have done a health checkup in a financial year, you can get a benefit of Rs 5000. If a person above 60 years of age gets health insurance for himself, then he gets a tax rebate of Rs 10,000 for a premium of up to Rs 60,000.
3. Additional tax saving of Rs 50,000 on NPS
Exemption on investment in NPS can be found to be up to Rs 2 lakh per annum. In addition to 1.5 lakhs under Section 80C, investing 50,000 rupees annually in NPS can save tax under Section 80CCD (1B). However, in the same financial year, tax on this investment cannot be claimed under section 80CCD (1) and 80ccd (1b) together. While it is also important to note that up to Rs. 45,050 thousand tax exemption can only be availed at the premium of up to Rs 2 lakh.
4. Save tax on house purchase
Under Section 24 (B) of Income Tax, you can avail tax rebate on buying a house also. If you have purchased a property for your own residential purpose, a tax exemption can be availed for both the principal and interest, instead of only a loan. Tax deduction under Section 80C is available on the principal of home loan. A tax deduction of up to Rs 2 lakh can be claimed on interest paid for house. Tax exemption of Rs 10,000 to Rs 62,000 can be claimed on this.