Last Updated on March 31, 2020 by Gopal Gidwani
With the beginning of the new financial year, many of you might be in a rush to start tax planning. The last-minute tax planning can lead to hassled decisions, which can often result in paying more than usual. Although the last-minute rush should be avoided, there are still ways to save you from it. Let’s understand the top three ways mentioned below to ace your last-minute tax planning.
1) Opt for investments plans that provide benefits under Section 80C
Section 80C can let you claim a deduction up to Rs. 1,50,000 on your taxable income. To understand where to invest money to make the most of the tax benefits available under Section 80C, you should glance through these following types of tax saving investment tools mentioned below:
a) Provident Fund (PF)
A PF account can allow you to generate income as well as earn return on investments. Under a PF account, you can select between the following types:
i) Public Provident Fund (PPF)
It is a government-backed plan under the Finance Ministry of India that can offer tax benefits. It is fully guaranteed by the Government. Presently the interest rate being paid is fixed at 7.9% p.a.
ii) Employee Provident Fund (EPF)
As a working professional, your employer might open an EPF account for you. Under EPF, a specific proportion of your income can be contributed towards it.
b) National Pension Scheme (NPS)
NPS scheme is a retirement investment plan introduced by the Indian Government for all the working class, self-employed people, business persons and the people working under the unorganised sector. With the NPS Scheme, you can receive pension after retirement. For contributions made towards NPS, you can get deduction of up to Rs. 1,50,000 under Section 80C and an additional deduction of up to Rs. 50,000 under Section 80CCD (1B).
c) Equity Linked Savings Scheme (ELSS)
An ELSS scheme is directly linked to the securities market in which funds are invested. Apart from returns, you can also claim deduction from taxable income up to Rs. 1,50,000 under Section 80C.
Note: There are a few other applicable tax savings investments under Section 80C, which are as follows:
- Pension plans
- Life insurance products
- 5-year bank or post office fixed deposits (FDs), etc.
2) Claim deductions under Section 80D, 80DD & 80DDB
During medical emergencies, many of you might either utilise your health insurance policy or spend from your pocket for your own treatment or your loved ones. Under Section 80D, you can claim deduction of up to Rs. 25,000 for health insurance premium paid for self, spouse and children. You can claim separate deduction of up to Rs. 25,000 (Rs. 50,000 for senior citizens) for your parents. Additionally, under Section 80DD, you can claim deduction for money spent on the maintenance / treatment of a dependent family person with disability. The family member can be your spouse, children, parents, brother and sisters dependent on you for support and maintenance.
3) Reduce your tax liability by philanthropic activities
Another way for reducing your tax liability can be by donating money to approved organisations for charity or philanthropic activities. When you donate for charity or philanthropic purpose, you can claim deduction from your taxable income. For some specified donations you can claim 100% deduction, while for other donations you can claim 50% deduction from your taxable income. In case you have an additional corpus that you may wish to donate, you should do so today since it can offer tax benefits. However, see to it that your donation is done through approved modes of payment like cheque, online payment or cash (if allowed).
To conclude, these suggestions mentioned above can allow you to reduce your tax even with minimal time in your hands. However, see to it that the next time you aim to save your taxes, plan it in advance to avoid last-minute stress. Moreover, planning your taxes early before you enter the new financial year can allow you to align your tax saving investments with your current financial goal.