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      Tax Saving Schemes

      • 5 min read
      • Last Modified Date: January 10, 2024
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      Tax Saving Schemes

      Ugh, taxes, taxes, taxes. Isn’t it a burden? Let us not be afraid to say that none of us enjoy the word “tax.” Let alone paying for it. But did you know that you may reduce your tax burden? One can reduce one’s tax load by participating in tax-saving programs or tax-saving schemes offered by the government and private organizations. Investment in these tax-saving schemes will enable you to become qualified for tax breaks and exemptions under several sections of the Income Tax Act.

      Income taxes in India can be decreased slightly by investing wisely in tax-saving initiatives. There are several options to minimize an individual’s tax liability by properly utilizing the various schemes. Sections of the Income Tax Act of 1961 dealing with tax exemptions and deductions include Sections 80C, 80D, 80CCF, and others. Both government and private-sector groups provide a variety of tax-saving opportunities to Indian citizens.

      IT Saving Schemes

      Income tax savings plans and schemes are available under the appropriate parts of the IT Act of 1961. The most important of them is Section 80C, which allows for annual tax savings of up to Rs.1.5 lakhs. There are additional areas that assist individuals as well. The following are significant income tax-saving instruments:

      1. Public Provident Fund (PPF): You can contribute up to Rs.1.5 lakhs each year to this tax-saving plan. PPF cannot be withdrawn without penalty before the age of 15 years.
      2. Read PPF: Eligibility, Tax Benefits, Interest Rate, How to Open Online, Withdrawal/
      3. Unit Linked Insurance Plans (ULIPs): These tax-saving programs offer a maximum deduction of Rs.1 lakh per year under Section 80C. In addition to investment exemption, maturity profits are also tax-free.
      4. Tax Saving Set Deposit: Tax Saving Fixed Deposits are provided for a fixed duration of 5 years, with a maximum investment of Rs.1 lakh per year to obtain tax benefits under Section 80C.
      5. Employee Provident Fund (EPF): Employee Provident Fund (EPF) is an investment program that provides tax advantages under Section 80C up to Rs.1 lakh per year.
      6. Read EPF – Employees’ Provident Fund, EPFO Benefits & Process.
      7. National Saving Certificate: Also known as an NSC, this instrument can be utilized to generate tax-free interest of up to Rs.1 lakh per year under Section 80C.
      8. Read NSC – National Savings Certificate.
      9. Infrastructure Bonds: This investing option offers a maximum annual exemption of Rs.20,000 under section 80C. Interest is taxable, although investors can obtain tax breaks of up to Rs.15,000 under Section 80L.
      10. Tax Saving Mutual Funds: This kind of fund provides for annual exemptions of up to Rs.1 lakh under Section 80C. Equity-linked savings schemes are popular tax-saving devices offered by mutual funds.
      11. Tax-Advantaged Mutual Funds

      Mutual funds that save taxes are sometimes known as Equity Linked Savings Schemes or ELSS. These funds provide the chance for financial appreciation through equity investing while also reducing taxes.

      Long-term capital gains from these plans are also tax-free, and dividend options for such funds allow for capital gains even during the lock-in period.

      The normal lock-in term is 3 years to 5 years, and the advantages are offered under Section 80C, which enables investors to tax breaks of up to Rs.1 lakh each year.

      HDFC Mutual Fund and IDBI Mutual Fund are two major investment institutions that provide Equity Linked Savings Schemes products.

      Postal Tax Saving Schemes

      Section 80C also applies to post office tax-saving initiatives. Every year, you can claim up to Rs.1 lakh in tax advantages through the different post office investment alternatives. The following are some of the biggest tax-saving programs provided by the post office:

      1. Account for time deposits
      2. 5 years recurring deposit account
      3. 15 years Account of the Public Provident Fund
      4. National Savings Certificate for Senior Citizens (VIII issue)

      Fixed Deposit with Tax Savings

      Fixed deposits with tax advantages are accessible from scheduled banks. These fixed deposit options are available for a 5-year term. According to Section 80C of the Income Tax Act, investors can claim a maximum tax advantage of Rs.1.5 lakhs via tax-saving fixed deposits. Leading banks in India that provide tax-saving FDs are

      1. The ICICI Bank
      2. HDFC Bank
      3. Axis Bank
      4. SBI Bank
      5. IDBI Bank

      Income Tax Sections That Provide You Tax Breaks And Save You Money

      Section 80C allows for annual exemptions of up to Rs.1.5 lakhs by investing in a range of programs and instruments mentioned in the section regulations. Aside from Section 80C, there are many additional parts of the Income Tax Act that offer exemptions to taxpayers. The following are the major sections:

      1. Section 80D: Medical insurance premium exemption for self, spouse, or children. The maximum exemption amount is Rs.25,000.
      2. Section 80DD: For the treatment or support of a physically challenged dependant. Individuals are eligible for a maximum exemption of Rs.15,000, while senior people are eligible for a maximum exemption of Rs.20,000.
      3. Section 80E: Education loan interest payback exemption. The entire interest payment is deductible for a maximum of eight years.
      4. Section 80G: Tax exemption for charitable contributions. Maximum investment exemption of 100%.
      5. Section 80GG: Exemption for housing rent paid up to Rs.2,000 every month or rent paid up to 10 percent of income or 25 percent of total income.
      6. Section 80GGC: Complete exemption for contributions to political parties.
      7. Section 80U provides an Rs.75,000 exemption for handicapped taxpayers and an Rs.1.25 lakh relief for seriously disabled taxpayers.

      Conclusion

      Apart from tax saving schemes, there are many ways you can save tax.

      Have you heard of tax shelters tho? Tax shelters are used by taxpayers to lower their tax responsibilities. A tax shelter lowers taxable income, resulting in a smaller tax burden. So, where are people looking for tax breaks, and how can you obtain one?

      To begin, a tax shelter is not a thing that you may purchase to protect your income from taxes. Instead, it is a mix of costs, credits, and occupational perks. The shelter is also determined by the sort of profit-generating enterprises in which a person is participating. And what better way to save tax than by investing in real estate?

      Real estate is used by investors to develop wealth. It sure is one solid way to build wealth. How so? This is mostly owing to its advantageous tax treatment. Via depreciation, operating expenditures, and long-term capital gains, real estate provides tax sheltering.

      Need assistance to start investing? Assetmonk offers the best real estate investment options available in Hyderabad, Chennai, and Bengaluru. It also provides high-quality assets with higher rental income and IRRs ranging from 14 percent to 21 percent. If you’re still seeking a decent investment partner, head over to Assetmonk and get started right away.

      Tax Saving Schemes FAQs

      Which is the Best Tax Saver scheme?

      The best ELSS or tax-saving mutual fund to invest in in 2022 is Axis Long Term Equity Fund.

      How can I reduce my income tax?

      The best way to reduce your income tax is via investing in tax-saving schemes. One can reduce one’s tax load by participating in tax-saving programs or tax-saving schemes offered by the government and private organizations. Investment in these tax-saving schemes like Public Provident Fund or Unit Linked Insurance Plans will enable you to become qualified for tax breaks and exemptions under several sections of the Income Tax Act.

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