The Interim Budget 2019 brought about major changes in the personal income tax rules. A full tax rebate has been announced for people who have net taxable income up to Rs. 5 Lakh. And if you are earning an income up to Rs. 6.50 lakh, you can get a full rebate considering that the standard deduction has been increased by Rs. 10,000 to Rs. 50,000. However, even if you are earning more than that, there are several smart tax saving avenues that can help you save more of your hard earned income.
Here are some of the most convenient tax saving avenues that can bring down your tax burden this financial year:
Invest in ULIPs
Unit Linked Invest Plans or ULIPs are one of the most tax efficient financial instruments available. ULIPs fall under the EEE (exempt-exempt-exempt) tax structure i.e. exempted at Investment Stage, exempted at Accrual and exempted at Withdrawal, which makes it extremely tax efficient. ULIP plans are a versatile investment avenue that offers dual benefits of Life Insurance and market-linked investments. The premium paid toward ULIPs is eligible for tax deductions under the Section 80C up to a maximum of Rs. 1.5 lakhs for a given financial year. Moreover, the amount you receive on maturity is exempt from tax under Section 10(10D).
Take up Life Insurance
Life insurance is one of the most basic necessities for a financially secure life. Besides offering financial security, Life Insurance plans also offer amazing tax benefits. You can avail tax benefits of Rs. 1,50,000 for the premium paid towards a Life Insurance Policy under Section 80C of the Income Tax Act.
Avail Health Insurance
With the cost of healthcare soaring through the roof, having a Health Insurance Plan has become more important than ever. Besides covering your healthcare expenses, a Health Insurance Plan also offers tax benefits. If you have Health Insurance, you can enjoy tax deductions on the premiums paid up to Rs. 25,000 for self and family (spouse and children) under the section 80D of the Income Tax Act. For a senior citizen, the tax deductions under health insurance increases to Rs. 50,000 for self and family. If you are paying for a health insurance plan for your parents, you will be eligible for a tax deduction of up to Rs. 25,000. The same increases to Rs. 50,000 in case of senior citizen parents.
Going by all of these tax deductions and exemptions you can reduce your taxable income substantially. Here’s an example to give you a clear picture; if your gross income for FY 2019-20 is Rs. 7.75 Lakh, you can reduce your income to Rs. 6.25 lakh by investing in a ULIP plan and claiming a tax deduction of
Rs. 1,50,000. Additionally, you can pay Rs. 25,000 as Health Insurance Premium for yourself and family and claim a deduction of the same amount from gross total income under section 80D. Moreover, you can invest R.s 50,000 under section 80CCD (1B) in the National Pension Scheme and get a deduction of the same amount. Assuming you have other interest income up to Rs. 10,000, you can claim that too under the section 80TTA. Once you claim all the above deductions, your gross total income will be reduced to a taxable income of Rs. 5 lakh which is effectively tax exempt.
So keep an eye out for these handy options when it comes to reducing your tax burden.
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