Your last minute tax-saving guide for FY21

As the 31 March deadline inches closer, many tax-payers rush to make last minute investments. While there are various investment avenues specified under the Income Tax Act that can help you save tax, in rush, you may end up investing in instruments that are not in sync with your financial needs.
You first need to calculate your tax liability and check, what deductions you’re eligible for how much you’ve exhausted. For instance, if your tax-saving investments under section 80C sum up to Rs 1 lakh, you can consider investing another Rs 50,000.

Here’s a list of various tax-saving instruments you can consider:

Section 80C: It allows a tax deduction of up to Rs 1.5 lakh in a various instruments. Public Provident Fund (PPF), National Saving Certificate (NSC), Bank Fixed Deposits (FD), ELSS, Life Insurance plans, Pension Plans, Home Loan repayment, among others fall under the ambit of 80C. You can invest in a product as per your financial needs and not just for the sake of tax-saving.

Section 80D: It offers a tax deduction of up to Rs 25,000 against insurance premium for self, spouse and kids. Additional deduction of Rs 25,000 can be availed against the premium paid for parents if they are below 60 years of age and Rs 50,000 if parents are senior citizens. Maximum deduction allowed varies in different scenarios and can reach up to Rs 1 lakh. You can claim deduction on term insurance, ULIP, health policies under this section.

Section 80CCD: To encourage retirement savings, the government provides tax deduction to individuals against contributions made to the National Pension Scheme (NPS) or the Atal Pension Yojana (APY) – under section 80CCD of Income Tax Act 1961. You can claim additional tax deduction of Rs 50,000 on NPS contributions under sub-section 80CCD (1B). These deductions are over and above 80C, 80CCC, and 80D deductions. “NPS is one of the best options especially for salaried Individuals who are looking for additional last-minute tax benefits to avail as it provides additional Rs 50000 tax benefit above 1.5 Lakhs, ”, says tax expert Kapil Mittal.

Section 80EE: First time homebuyers can avail tax deductions under this section. If you buy a house under Pradhan Mantri Awas Yojana (PMAY) which costs less than Rs 45 lakh and the loan amount is 25 lakh, you can avail an additional deduction of Rs 1 lakh on the interest.

Section 80TTA: A tax deduction of up to Rs 10,000 is allowed on interests earned from savings bank account under this section. Tax-saving investments should be made to fulfil your financial goals, hence it is very important to choose the right instrument for your investments.