Every Citizen in India must pay income tax for the development of the country. As per the Livemint report, the total revenue generated from Income tax alone in the past financial year 2022-23 is 9.45 trillion rupees that is 126.33 billion dollars reported by the Central Board of Direct Taxes(CBDT). These numbers are higher than the expected amount in the budget.
The above statistics confirm that Indian citizens are concerned with their duty of filing Income tax. But due to lack of knowledge, many taxpayers found that their tax liability is more than they expected. There is so much complication in CBDT’s tax collection and related services that ordinary people get confused and fill in more tax than their actual amount.
Some people use basic tactics like investing in a savings plan or crediting more money in saving accounts, using Section 80 in each financial year etc., for tax deductions. But it doesn’t reduce much from your income tax amount. This excessive burden of income tax that ends up debiting more tax amounts can be resolved using the savings plans provided in detail in this guide.
Intelligent ways of tax saving in India
There are numerous tax saving plans available that you can utilize in your future for younger retirements, financial freedoms, and long term wealth creation instead of filing higher income tax than expected from you. These saving plans are:
Insurance is a great way when it comes to an efficient tax saving plan. There are various options available under insurance like wealth maximization, health coverage, life insurance retirement plans etc. The most renowned tax savings plan under insurance is life and health insurance because of higher tax deductions and more secure and protective options than any other insurance type.
In the past several years, medical expenses have increased on a higher margin, and that’s why more people are conscious about health insurance than at any time, especially after the rise of the Corona virus pandemic. Health insurance also significantly benefits tax deductions and is a vital necessity in today’s world. The government also reduces tax on health insurance for the safety of citizens.
One can claim tax deductions on annual income taxable amounts spent on the health insurance premium and ensure higher savings on income tax under Section 80D. The further tax deductions also depend on factors like age of the insured, type of diseases insured facing, etc.
Under any Life Insurance service, the maximum tax deduction that one individual can avail of is 1.5 lakh rupees. It includes several aspects such as the premium paid on life insurance, investment holdings, care addons etc. All the life insurance options fall under section 80C of the income tax act for tax savings.
The minimum years of holding any Life Insurance surface is two years and is maximum up to 5 years. If any individual wants to terminate the insurance service midway, then the benefits in the tax-saving plan related to insurance terms also get reversed.
Dual benefits Savings Plan
Dual benefit saving plans are among the most popular options for putting money into future growth, both in wealth creation and protective measures. Dual benefits mean that these types of saving plans provide both investment and insurance facilities under the same roof. They are also beneficial in terms of tax benefits. Let’s look at popular dual benefits plans and their tax deduction terms.
Endowment plans are a life insurance policy that comes with dual benefits of both insurance and investment. It facilitates risk-free savings and as well as financial family protection in case of any mishappenings. It helps insured persons to save a part of income over a particular tenure to provide a lump sum amount assured with fun value and additional benefits on the maturity period of the term.
Endowment plans also provide large tax deductions on the amount you get on maturity of tenure of an endowment savings plan under Section 80C and 10(10D) of the income tax act.
ULIP plans provided an average of approx 8.9% returns each year from the past three years as per economic times analysis. It is one of the most efficient tools when it comes to tax savings.
In ULIP, suppose your cover is ten times the annualized premium, then the total income from ULIP gets tax free under Section 10(10D). Instead, one can also save tax on premium payment, and portfolio changes unlink ELSS funds.
National Pension Scheme
Anyone enrolled in a National pension scheme can avail of tax benefits of up to Rupees 1.5 lakhs under Section 80CCD(1) and 80CCE. It is an essential requirement for retirement planning, and investing in it from an early age can save more considerable tax benefits and wealth.
In the National Pension Scheme(NPS), one can also avail of the additional benefits of 50000 rupees. So in this tax saving plan, an investor can avail tax benefits of up to 2 lakh rupees and create wealth for their retirement at the same time.
In NPS, any citizen above the age of 18 years to 60 years can enroll. Every sector like public, private, and even unorganized sector except Armed forces can participate with a bare minimum of 60000 rupees in a financial year of 500 rupees per month. The other benefits of NPS except tax savings are Higher returns and interests, Premature withdrawals and beneficial exit rules, efficient risk assessment etc.
Home Loan Payments
Home loan and housing loan are some of the most popular tax saving plans in India. There is an excellent scope of tax detection in this saving plan. One can avail up to 1.5 lakhs deductions on principal repayment of home loan under Section 80C and up to 2 lakhs on interest repayment under Section 24B.
Any individual can also prepay the principal amount and thus can save an additional 1.5 lakhs under Section 80C of the Income Tax act. Moreover, depending on the property aspects and borrowing amount of the loan, further deductions are available of up to 50000 rupees under Section 80EE. On loan interest repayment, 1.5 lakhs deductions are also possible under Section 80 EEA.
An individual purchasing property for home constructions can also benefit in tax savings under Section 24B, provided that the construction should finish within five years of property purchase. In the case of renting a new property, the entire interest component deducts from annual tax calculations. Due to this many tax benefits, more people enrol in a home loan to save tax amounts and construct a property for themselves with this tax saving plan.
Most of the citizens in India are filing higher income tax payments due to a lack of knowledge and experience in the finance world. The government runs various measures for the betterment of individuals, which is why they create several plans for their prosperous future. But the amount that should invest in these plans for future growth is now wasted regularly in higher tax fillings.
This guide helps you understand different measures and ways to use as a tax saving plan to reduce your tax amount and invest efficiently in your future growth.
Leave a Comment
You must be logged in to post a comment.