Scrambling for last-minute income tax saving options? Here are 5 ways to do it

“As the famous saying goes ‘A penny saved is a penny earned’. Tax planning is one of the ways which can help you save on taxes and increase your income,” Archit Gupta Founder and CEO at ClearTax said. The income tax act provides deductions for various investments, savings and expenditure incurred by the taxpayer in a particular financial year, he added.

“If you want to save income tax at the last minute, using the 80C deduction is one of the most preferred ways. Most taxpayers only need three tax savings options. First is health insurance, second is term insurance, and third is for those who want to save tax and maximise their returns – equity-linked savings schemes (ELSS), also known as tax-saving mutual funds,” Adhil Shetty, Chief Executive Officer (CEO) of Bankbazaar.com said. NSC, PPF, SSY and SCSS can be availed via an authorised bank or post office, he added. “These schemes are entirely safe and offer assured returns to investors. However, going through the returns, ELSS scores higher than other options,” he suggested.

1) Section 80C
Small Saving Schemes are a good way to save tax while making decent income for those who have a low appetite for risk. Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), National Pension System (NPS), Senior Citizen Saving Scheme (SCSS) are some of the schemes where one can look to invest.

People averse to market risks, you can opt for EPF or PPF, whichever suits your financial goals, Shetty said. “Currently, the interest rate on EPF is 8.10%, while PPF gives you 7.1% per annum. Another popular option is the National Pensions System (NPS),” Shetty said. SSY (7.6%) and SCSS (8%) are the postal savings schemes you can choose to save on tax, Shetty recommended.

Make an investment of Rs 1.5 lakh under Section 80C to reduce your taxable income. Additional deduction of Rs 50,000 can be claimed by investing in NPS under 80CCD (1b), Gupta said.

If a home loan is taken jointly, each borrower can claim deduction on home loan principal repayment up to Rs 2 lakh under this section.

2) Section 80CCD
“Section 80CCD of the income tax act deals with deductions offered to individuals contributing to the NPS. As per Section 80CCD(1B) an additional deduction of up to Rs 50,000 for contributions made by individual taxpayers towards the NPS can be claimed. The additional deduction of Rs 50,000 under Section 80CCD(1B) is available to assess over and above the benefit of Rs 1.50 lakh available as a deduction under Sec 80CCD(1) [which is under the overall limit of Section 80C]. By depositing funds in their NPS account, taxpayers can claim a total of Rs 2 lakh deductions Rs 1.5 lakh under 80C and Rs 50,000 under 80CCD(1B),” the ClearTax founder said.

3) Section 80 D
Buy Medical Insurance where maximum deduction of Rs 100,000 (Rs 50,000 for self and family if senior citizen and Rs 50,000 for senior citizen parents) under Section 80D, Gupta said.

4) Section 80EE
Claim deduction up to Rs 50,000 on home loan interest under Section 80EE can also be claimed under this section, said Gupta.

5) Section 80G
Any charity to notify institutions or funds, can be claimed as a deduction under section 80G, Gupta said.

Gupta’s Tax Planning Tips

1) Check the tax-saving expenses you already have – like insurance premiums, children’s tuition fees, EPF contribution, home loan repayment etc.

2) Deduct this amount from Rs 1.5 lakh to figure out how much to invest.

3) You needn’t invest the entire amount if expenses are covering the limit.

4)Choose tax-saving investments based on your goals and risk profile. ELSS funds, PPF, NPS and fixed deposits are some of the popular options.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)