Know your options for tax savings as the financial year is coming to an end

Only three months are left for the financial year to end and this is the high time that you plan your tax savings. Let's have a look of some of the ways that can help you save your income tax.

HRA is fully taxable if the employee is living in his own house. Image source: Pixabay

Disclaimer: This story is for informational purposes only and should not be taken as investment advice.

Only three months are left for the financial year to end and this is the high time that you plan your tax savings. Let's have a look of some of the ways that can help you save your income tax.

ELSS
Invest in ELSS and save up to Rs 45,000 per year. ELSS or tax saving/planning mutual funds has the shortest mandatory lock-in period of 3 years and gives high returns that are tax-free and the investment options available under Section 80C.

On the other hand, a Public Provident Fund (PPF) account is essentially a long-term (15 years) product. Even a National Savings Certificate (NSC) comes with a lock-in period of five years.

One should not treat ELSS as the short term investment option but should invest in it for at least five to seven years.

HRA
A rented house can always reduce your tax even more. HRA is a component of every employee's salary structure but unlike the basic salary HRA is not entirely taxable.

An employee can save tax through HRA as this component is deductible from the total income before coming to a taxable income.

HRA is fully taxable if the employee is living in his own house, but if you are staying with your parents then you can claim the benefits by paying the rent to your parents.

Medical Insurance
Deduct up to Rs 30,000 in taxes for medical insurance premium payment of your spouse, children and parents. If your parents are senior citizen and you are paying the premium for them then you are eligible for an additional deduction of Rs 25,000.

Under Section 80 D of the Income Tax Act, 1961, one is eligible for claiming tax relief after buying a health insurance.

Children's Tuition Fees
You can claim tax deduction under Section 80C on tuition fee for education of two children of up to Rs 1.5 lakh a year.

Housing Loan
Buying a new house? Your housing loan repayment will be eligible for tax saving. Under Section 24B, you are eligible for tax benefit if you are paying the interest for your housing loan.

Only Rs 2 lakh as interest is allowed for deduction on housing loan in a financial year from your income. But if you are taking a home improvement loan then Rs 30,000 is allowed as the interest from your income.

Some of the other expenditures allowed under Section 80C deduction are home loan principal payment, stamp duty and registration cost of the house at the purchase of house.

Education Loan
You can avail a tax deduction on the interest paid on your education loan. Under Section 80E, the interest paid on education loan is allowed as a deduction from your total income. However, the deduction is provided only for interest part of the EMI provided the loan is taken from any bank or financial institution or any approved charitable institutions.

The loan should be taken to pursue higher studies within or outside India.