Struggling to find the right investments to save on Income Tax? Don’t worry, we have you covered! As per the old income tax regime, you can claim deductions and exemptions under the various sections of the Income Tax Act, 1961. These exemptions and deductions help you reduce your taxable income, and consequently, your tax liability.
Note: You must make these investments in suitable tax-saving instruments after April 1 and before March 31 of the financial year in question.
Any individual or business earning an income has to file their income tax returns irrespective of the earnings. However, filing income tax returns is mandatory only if the gross income earned is more than the basic exemption limit of ₹2.5 lakh.
Here are some of the entities that are liable to pay taxes based on the net taxable income and file IT returns:
Salaried and self-employed individuals
Hindu Undivided Family (HUF)
Body of Individuals (BOI)
Association of Persons (AOP)
Companies and corporate firms
We understand that filing your income tax returns can be quite a tedious and confusing process. It becomes a hassle to submit different acknowledgements. However, if you want to save money on tax, it is essential to manage your tax-saving investments.
So, when it comes to tax-saving, you have to understand the income tax slabs. In the Union Budget 2020, a new tax regime was introduced to help people save money via lower income tax rates. However, this new regime also eliminated most of the income tax deductions and exemptions available under the old regime.
To take a look at the old and new tax slabs and rates for the financial year 2020-21, you can head over to our comprehensive guide on income tax returns filing in India.
Here is where tax planning comes in handy. You can select either of the two tax regimes on the basis of your claimed income tax deductions and exemptions. The new tax regime has provided lower tax slabs for income less than ₹15 lakh. But to avail the benefits of a lowered tax slab rates, you have to forfeit a range of exemptions and deductions like HRA, LTA, investments under Section 80, and so on. If you are looking to save on taxes by opting for the old tax regime, you can choose to make investments in different tax-saving avenues. Here, we give you a detailed overview of the scope of the various tax-saving instruments.
Here are some types of tax-saving instruments available on Finserv MARKETS:
A health emergency can strike anytime. Moreover, with rising inflation, it can be difficult to cope up with the rising medical costs, thereby affecting your savings during an emergency. A health insurance policy covers emergency medical costs and secures you from the financial loss incurred during treatment. You can also enjoy tax benefits up to ₹1 lakh on purchasing a health insurance plan under Section 80D of the Income Tax Act. Health insurance plans available on Finserv MARKETS are tailor-made to suit your needs and offer various benefits, including comprehensive coverage, cashless claim facility across 6,500+ network hospitals, and much more.
Every person dreams of purchasing a home of their own. But did you know that you can avail tax benefits on home loans as well? Under Section 80C of the Income Tax Act, 1961, you can claim the principal repayment amount up to ₹1.5 lakh. This includes the registration and stamp duty charges. Apart from this, you can enjoy tax savings on the interest component of your home loan under Section 24(B) of the Income Tax Act, 1961. The maximum deduction is limited to ₹2 lakh per financial year. Moreover, you can claim additional deductions under Sections 80EE and 80EEA, provided you are eligible for the same. Head on over to apply for a home loan on Finserv MARKETS to purchase your dream house!
ULIP (Unit-Linked Insurance Plan) is a combination of insurance and investment. This financial instrument enables you to make the most out of your investment while also saving on taxes. Apart from this, you also get insurance coverage against unforeseen risks to safeguard your family. Moreover, you can claim tax deductions of up to ₹1.5 lakh on the investments made in ULIPs under Section 80C of the Income Tax Act.
Be it saving for your child, building a corpus for your retirement, or saving on taxes, Finserv MARKETS brings Bajaj Allianz Long Life Goal ULIPs that are sure to fetch you great returns.
Life is full of unpredictable scenarios, and you never know what could come your way. In this case, protecting your life's goals is important to ensure that you are prepared for the worse. A comprehensive term plan like the Smart Protect Goal Term Insurance available on Finserv MARKETS acts as an ideal financial blanket. It allows you to safeguard your future goals and ensure that your family keeps up with their aspirations even if anything were to happen to you. Also, it allows you to claim tax deductions under Section 80C of the Income Tax Act, 1961.
Looking for tax benefits through an investment vehicle? ELSS funds are the best choice for you. With a lock-in period of just 3 years, you can also enjoy tax deductions of up to ₹1.5 lakh on the ELSS investment under SectIon 80C of the Income Tax Act. Money can be invested either through the SIP or lump sum methods. Grow your wealth and save taxes with ELSS investments.
The National Pension Scheme is a government scheme to provide people with post-retirement financial independence! You can get tax benefits under Section 80CCD (1B) of the Income Tax Act with an additional deduction of ₹50,000 on your NPS investments. What’s more! You get flexibility of choice with a host of investment options and fund managers. It is regulated by PFRDA (Pension Fund Regulatory and Development Authority). You can easily track and manage your NPS account online with easy portability.
Apart from the above-mentioned tax deductions, taxpayers can also look at the following investments to reduce their income tax liability.
If you are looking for a guaranteed return investment option, then bank FDs are for you. The five-year tax-saver fixed deposit is a hassle-free method of reducing your tax liability in case you have a low risk appetite. With a lock-in period of 5 years, you can claim a maximum amount of ₹1.5 lakh under Section 80C of the Income Tax Act, 1961, from your tax-saver FD investment. As the tax-saving bank FD has a tenor of 5 years, premature withdrawals aren’t allowed.
As a salaried individual, you contribute a certain percentage of your income towards Employees’ Provident Fund (EPF). This amount acts as a retirement fund for employees and ensures financial security after they retire. An employee's contributions towards EPF are eligible for deductions under Section 80C of the Income Tax Act, 1961. Hence, you can enjoy income tax savings on your EPF investment by increasing your contribution. Moreover, you can even ask your employer to increase your contribution towards EPF, essentially increasing your investment and reducing your taxable income.
Apart from the income tax-saving tools mentioned above, there are other financial tools that enable you to save money on tax:
Public Provident Fund is a long-term investment option that offers post-retirement financial backup. With a lock-in period of 15 years, you can benefit from the power of compounding as the interest rate on this government scheme resets on a quarterly basis. Moreover, PPF enables you to make partial withdrawals (after completing a certain tenor) and also avail tax benefits under Section 80C.
Sukanya Samriddhi Yojana is a government-backed scheme enabling low-income families to safeguard the future of their daughters. A maximum of two accounts can be opened, one for each girl child. The contributions can be claimed under Section 80C of the Income Tax Act, 1961, whereas the interest earned, maturity amount, and withdrawals are fully tax-exempt.
To plan your SSY investment maturity amount, use the Sukanya Samriddhi Yojana Calculator available on Finserv MARKETS!
If you are looking for a fixed investment scheme that offers tax benefits, then NSC is a suitable choice! It is a government-backed savings scheme offering you tax benefits under Section 80C. With a lock-in period of 5 years, you can begin investing in NSC through any Indian Post Office.
Specifically designed for senior citizens, SCSS is a low-risk investment option with a five-year lock-in. A maximum one-time investment of ₹15 lakh can be made with a minimum limit of ₹1,000. Such a financial instrument is a lucrative avenue for senior citizens due to the high interest rate of 7.4% and the tax benefit available under Section 80C.
Income tax rates for individuals in India are based on their age and income. Every year, the Government announces tax slabs applicable as per these parameters in the Budget. You can use our income tax calculator to determine your payable tax amount as per latest government guidelines.
For Males below the age of 60
For Females below the age of 60
For Senior Citizens (resident taxpayers aged 60 and above)
For very Senior Citizens (resident taxpayers aged 80 and above)
If you are a salaried employee, your employer would ask you to carry out an investment declaration at the start of each financial year. An investment declaration, as the name suggests, informs the employer of the estimated investments you intend to make in the given financial year. The proof of your actual investments need not be provided until the end of the fiscal year. You are permitted to invest more or less than the amount you originally declared. In other words, the final investments need not be exactly the same as were declared at the start of the fiscal.
The purpose of an annual investment declaration is so that your employer can know about your tax-saving investments for that year. Accordingly, your employer can then deduct tax at source (TDS) from your monthly salary. Therefore, declaring your investments is essential as it leads to greater in-hand salary.
Salaried employees have to submit Form 12BB at the end of the financial year to prove their investments and claim income tax deductions and rebate. Your employer may also ask for documentary evidence to verify your declaration. It is the final step of your investment declaration via your employer.
This situation arises when an employee is not able to invest the amount as declared to their employer at the start of the financial year. As mentioned above, the employer calculates the Tax to be Deducted at Source (TDS) based on the original investment declaration. In this scenario, the employee owes more in taxes as they did not invest the amount declared. Hence, the employer shall recalculate the employee’s tax liability and subsequently adjust it in the next few month’s salary.
However, if the employee makes the investments before the end of the financial year (March 31), they can claim a tax refund from the Income Tax Department after filing the ITR (Income Tax Returns).
This situation comes up when an employee invests the exact amount that has been declared at the start of the fiscal year. The employer will deduct the right amount of TDS from the employee’s monthly income. Additionally, in this situation, the tax paid by the employee is also equal to the amount owed to the Income Tax Department. Hence, the employee simply has to file their tax returns during the year’s end and claim ‘nil’ returns.
In this situation, filing returns is simple, unless there is an additional source of income not accounted for.
Suppose an employee declares investments worth ₹60,000 at the start of the fiscal year. However, they end up investing ₹1.2 lakh into tax-saving instruments before the end of the financial year. Ideally, this would mean that the employee has saved more in taxes.
However, the employer has been accounting for more TDS from the employee’s monthly salary with the presumption that they will only invest ₹60,000 as stated in the declaration. Thus, the employer has been paying a larger amount of tax to the government than actually required on behalf of the employee.
In such cases, the employee is eligible for a tax refund, which can be claimed during ITR filing.
Thus, it is smarter to declare your investments at the start of the year. This ensures that your employer will deduct tax from your salary and you shall be maximising tax savings early on.
Continue your journey on Finserv MARKETS to know more about the different tax slabs and how to file ITR or to compute your tax liability for assessment year (AY) 2021-22 with our income tax calculator. Finsev MARKETS is a one-stop shop to help you reduce your tax liability. Invest today!
There is no limit to the number of tax-saving schemes you can invest in. However, there is a limit on the amount you can claim in deductions per financial year. For example, under Section 80C (including Sections 80CCC and 80CCD) of the Income Tax Act, 1961, you can claim a maximum amount of ₹1.5 lakh.
You can choose to invest your income in several tax-saving financial instruments that meet your long-term goals and also help save money on taxes. You can make use of our income tax calculator in case you want to determine your tax liability and plan your investments accordingly.
Following are the various investment tools that promote tax savings under Section 80C of the Income Tax Act:
Equity-Linked Savings Scheme (ELSS)
Term insurance plans
National Pension Scheme (NPS)
Sukanya Samriddhi Yojana (SSY)
Tax-saving Fixed Deposit
Public Provident Fund (PPF)
Senior Citizen Savings Scheme (SCSS)
National Savings Certificate (NSC)
You can opt for other financial tools given below as tax-saving options:
Health insurance plans under Section 80D
Home loan interest under Section 24
Donations under Section 80G
Education loan interest under Section 80E