People in our country are still unaware of various ways in which tax can be saved legally. There are various ways in which one can save a certain amount of money that would have been otherwise paid to the government. Individuals can invest in a varied number of investment options in the market and help save taxes.
By investing in the various financial scheme you can get a deduction on your taxable amount. One can also restructure his assets and wealth and invest in some other financial tools where you can make your own tax saving plan and get a deduction on your taxable amount. With the help of a tax-saving calculator, you can calculate your taxes in seconds. By this, you can get an idea and make a proper plan to deposit in tax saving investment.
However, many people still do not have an idea about how to save tax and where to invest to get a deduction on tax. To help them out, some common FAQs about tax saving schemes are mentioned here.
Some common FAQs on saving taxes in the country
Q: What is the best way to save tax?
There are different financial instruments where one can invest his money to get the tax-saving benefit. Under section 80C, one can make an investment of an amount up to Rs. 1.5 lakhs against your PPF, home loan etc.
Moreover, there is another way to get a deduction on your tax. It can be done by investing against home loan under section 80EE. By availing this plan, you can claim a deduction of up to Rs. 50,000 on your taxable amount. You can also take medical insurance under section 80D and by this, you can get a deduction of up to Rs. 25,000.
Q: Which investment instruments are tax-free and where to invest to save tax?
There are some investment instruments where you can get the tax free benefit. Some of them are:
- Employer’s Provident Fund (EPF)
- Senior Citizen Saving Scheme
- National Pension Scheme (NPS)
- Sukanya Samriddhi Account
Some other tax-saving investment instruments that every taxpayer of India should know are:
- 5 years Bank Fixed Deposit
- Equity Linked Investment Plan (ELSS)
- Life Insurance
- Unit Linked Investment Plan (ULIP)
- Senior Citizen Saving Scheme
- Public Provident Fund (PPF)
However, Public Provident Fund (PPF), Sukanya Samriddhi Yojana are a long-term investment but if you want to invest in short term basis, you can invest in the ELSS. The ELSS funds offer a lock-in period of three years, which is quite less a tenure compared to other funds.
Q: Why proper planning is important to save tax?
Availing a proper tax saving plan is important. It is because this plan reduces your tax liabilities and also helps you to achieve other financial targets that you have set earlier. However, you should consider not to make this tax saving plan to achieve a temporary goal. Only with the proper investment plan, you can build wealth with your hard-earned money and you do not have to pay a major part of your income to Government.
Q: How many tax-free investment instruments one can have and what is the maximum amount one can save?
According to the Indian Income Tax Act, there are no limits on the number of tax-free tools one can avail. However, a certain limit has been set on the amount that can be claimed as tax benefits.
Under Section 80C, you can claim deduction up to Rs. 1,50,000 towards the premium you have paid.
Ideally, you should plan to save tat thew very beginning of the year and you should be careful before investing your money in any tax saving funds. Before making a taxable investment, you should know about the tax rate that applies to you and consider the post-tax return. You can only enjoy the tax-saving benefit by investing in the proper financial schemes in a proper way.