This time of the year when salaried professionals have to submit proof of tax saving investments.
“If you don’t submit your investment proofs to the employer, they will compute your tax without giving the benefit of deductions like 80C and 80D. As a result, more tax will be deducted from your salary and you will get less take home salary,” said tax expert Gauri Chadha.
However, this does not mean you will have to pay more tax. While filing your income tax return, you can claim actual deductions and get refund for the excess tax paid, but it is always advisable to submit the proofs so that your income tax return matches with your form 16 and there are no chances of getting a notice.
So, is you still have not sorted out your tax-saving plans, then check out these five options:
Taxpayer gets deduction of Rs 1.50 lakh under section 80C of income tax. In which there is a tax rebate on the insurance premium payment. If you do not have life insurance, then you can buy a term insurance. But keep in mind that you do not buy insurance that is promising to give you returns. You have to buy a simple term insurance which is giving you a life cover. Don’t get tempted for earning return from insurance because this may trap you in a wrong insurance product. If you have a term insurance then forget buying an additional insurance for tax saving.
If there is insurance, you can save tax by investing in the government’s small savings scheme. These schemes offer a tax rebate along with compounding interest. You can get a National Savings Certificate from the post office which has a lock-in of five years and an interest of 6.8%. Or you can open a recurring deposit account with a compounding interest of 5.8%. Public Provident Fund (PPF) account can be opened in a bank or post office. PPF accounts mature in 15 years. The investment is getting 7.10% interest.
If you want to make an investment that gives you equity market returns and tax exemption, then choose a tax saving equity mutual fund. Eighty per cent of these funds are invested in equities. Whether you do an SIP (small installments) or pay a lump sum, you can take advantage of 80 C deduction by reducing the amount of investment from your income. Just keep in mind that there is a lock in of three years in ELSS and every SIP will be mature in cycle of one year.
If you do not have health insurance, you can claim an additional rebate of 80 D by paying a health insurance premium of up to Rs 25,000. If you pay health insurance premiums for parents too, then these discounts can be taken up to Rs 50,000.
Savings and tax exemption for retirement – On NPS investment you get an additional exemption of up to Rs 50,000 under section 80 CCD1 (B). You invest in a pension fund linked to equity and debt by depositing money in a pension account. You get returns in terms of the performance of the fund. After the age of 60 years, you can withdraw 60% of your money tax-free with the remaining 40% through an annuity plan.
So make tax saving investment and take returns as well as benefits like life cover, health cover or pension.
