Insurance Premiums to investment in parents' name: 5 ways to save income tax
You can save maximum tax by investing in different savings instruments which are eligible for deductions under Sections 80C and 80D of the Income Tax Act, 1961.
Tax burden often increases financial stress and every earning professional wants a way to save the most on their total tax liabilities. Generally, most of the taxpayers invest in tax-saving investment options to claim deductions.
However, choosing the correct options that come with the best tax benefits is essential if reducing tax burden is your ultimate goal. You can save more tax by investing in your parents’ names apart from the popular Section 80 savings options.
Tips to save more on income tax
Insurance premiums: Buying a health insurance policy will enable you to avail tax exemptions under the Section 80D of the Income Tax Act, 1961. These exemptions would be applicable depending on the age of the policy holder. While young people can claim up to Rs 25,000 rebate on medical insurance premiums, senior citizens (aged 60 years and above) get an exemption of up to Rs 50,000. Therefore, getting a health insurance policy for senior members of your family would be helpful in saving higher taxes. In addition, you can buy a life insurance policy to get up to Rs 1.5 lakh exemption under the Section 80C of the I-T Act.
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Invest in government schemes: While government schemes are risk-free, some are also tax-free and investing in them would save you a significant amount of taxes. Income tax benefits can be availed by investing in Senior Citizen Savings Scheme (SCSS), National Pension Scheme (NPS), Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY). Moreover, these government schemes offer substantial returns as well, which can be an added advantage.
Invest in Equity-linked Savings Scheme (ELSS) SIPs: Equity-linked Savings Scheme (ELSS) mutual funds are the only mutual funds that offer tax deductions and creating an SIP to invest in ELSS could be helpful in saving taxes. You can claim tax deductions on annual ELSS investments of up to Rs 1.5 lakh under the Section 80C of the I-T Act.
Make investments in your parents' name: By investing in your parents' name, you can save taxes under the Section 56 of the I-T Act under the head- "Income from Other Sources”. In case your parents fall into a lower tax slab or the nil bracket then you can save taxes up to Rs 5 lakh.
Charity Donations: By donating to charity, you can claim a deduction on the donation amount under the Section 80G of the I-T Act. Moreover, in some cases you can get a rebate of 100 per cent of the amount donated.