Wealth Guide: Distressed With Tax Filing Work? Here are 10 strategies for meticulous tax planning in FY23!

In India, as you start working and earning, tax planning becomes an important area to take care of. While it is true that paying taxes is unavoidable, with proper and advanced tax planning for the year, you can pay less taxes or get a higher return at the end of the year.

But the problem is that most people leave this task for the end of the fiscal year, and this seems to be a heavy and overwhelming process.

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In India, the tax planning structure and investments are designed in such a way that people can accumulate funds to secure their financial future and that of their families effectively while contributing to the development of the nation.

From equity-linked savings schemes (ELSS) to health insurance, there are many ways people can achieve their individual financial management goals while paying necessary taxes to the government.

Against this background, Vikas Singhania, CEO of TradeSmart, highlights 10 ways one can plan for tax-saving investments and take advantage of various accompanying benefits and rebates:

1. Public Provident Fund:

The Public Provident Fund (PPF) is a government-based investment scheme that focuses on creating a retirement corpus. PPF helps employees plan for retirement by collecting small savings and providing some tax relief.

Under section 80C, a PPF tax deduction of up to INR 1.50 lakh can be claimed. This is an exceptionally beneficial category where interest and maturity are tax exempt. It is important to note here that investments made in the PPF account have a lock-in period of 15 years. However, depositors can withdraw from the existing PPF account or continue it for the next five years.

2. National Pension System:

The National Pension System (NPS) is a flagship retirement planning plan. Under NPS, both private sector and government employees can build a solid corpus during the period and generate a monthly income during the retirement period.

There are two different types of accounts in NPS: Tier 1 and Tier 2. While Tier 1 falls under Section 80 CCD (1) and Section CCD (1B), the latter is a voluntary scheme.

In NPS, the minimum amount invested for level 1 and level 2 is INR 500 and INR 1000, respectively. Additionally, NPS allows employees to gain insight into the stock markets.

3. Savings Scheme Linked to Variable Income:

To be precise, Equity Linked Saving Scheme (ELSS) are tax saving mutual funds. ELSS also has the lowest lock-in period of three years compared to government-backed investments.

It is also crucial to note that the equity-linked ELSS provides tax relief under Section 80C while also providing opportunities to make lucrative investments in the stock market.

4. Tax Saving Time Deposits:

What is better than fixed deposits (FD)? The answer is tax saving FDs. On investments made in tax-saving FDs, depositors can earn a higher interest rate.

Also, people who invest in FD to save taxes are eligible for deduction under Section 80C with the maximum exemption of INR 1.50 lakh. But there is a small catch. Tax-saving FDs have a five-year lock-in period with no possibility of early withdrawal.

5. Life insurance:

If you want to save taxes and at the same time plan to protect your family against an uncertain event, Life Insurance is the perfect bet. Both the Life or Temporary Insurance Plans and the Unit Linked Insurance Plans offer notable tax benefits.

If you have life insurance, you are eligible for a maximum deduction of INR 1.50 lakhs under section 80C. Also, in ULIP, the tax exemption is extended to a maximum number of INR 2.50 lakh.

6. Savings Plan for the Elderly:

The Senior Savings Scheme (SCSS) was introduced to help seniors over the age of 60 with a regular source of income.

At present, under section 80C, the maximum exemption set is INR 1.50 lakh with the current interest rate of 7.4%. The good news is that SCSS allows people to take an early retirement.

7. National Savings Certificate:

Another scheme of the Indian government is the National Savings Certificate (NSC). It is a fixed income scheme where investments can be made with a minimum amount of INR 100.

This scheme has an investment tenure of five years, and depositors have the option to claim the full amount at maturity. Under Section 80C, a tax deduction can be claimed in the maximum amount of INR 1.50 lakh.

8. Sukanya Samriddhi Yojana:

In 2015, to secure the financial future of the girl, the Indian government launched a scheme called Sukanya Samriddhi Yojana. If you plan to support her daughter’s education and marriage, investing in this plan is a good idea.

Also, like most of the other schemes on this list, Sukanya Samriddhi Yojana also allows a maximum tax exemption of INR 1.50 lakh under section 80C.

9. Health insurance premium:

Under Section 80D of the Income Tax Law, one can obtain a tax exemption on the Health Insurance Premium. Health insurance tax exemption can be claimed on regular health insurance and critical illness premiums.

An ordinary man can avail a maximum tax deduction of INR 25,000 for the premium paid for himself and his immediate family members. In case the payer’s parents are over 60 years old (seniors), the exemption limit is extended to INR 50,000 in a fiscal year.

10. Mortgage loan:

If you want to save taxes and acquire a physical asset at the same time, taking out a mortgage loan is the best option. Whether you take out a home loan individually or jointly, everyone involved can claim tax exemption.

Under Section 80C of the Income Tax Act of India, the payer of a Mortgage Loan can claim a maximum tax exemption of INR 1.50 lakh on the principal repayment amount. Also, under Section 24, the payer(s) can claim a maximum deduction of INR 2 lakh on the interest paid.

In one word

Taxes are a permanent and secure aspect of adult life. If a person plans taxes meticulously and well in advance, he can easily avoid paying high taxes and at the same time save under different schemes by creating a varied portfolio.

Be smarter and more financially secure by investing in one or more of the above schemes, and plan your tax savings tools ahead of time to avoid heavy deductions from earned income.

(Disclaimer: Any opinions/suggestions/advice expressed here in this article are solely those of investment experts. Zee Business suggests its readers consult with their investment advisors before making any financial decisions.)

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