Pratik falls under the 30% tax slab and he is yet to make any tax saving investments this financial year. Considering there are only a few days to go by before the tax season comes to an end, any investment option that has a long-drawn process will be out of bound around this time. Pratik will have to handpick some quick and smart options to reduce his tax outgo. Section 80C of the Income Tax Act alone can help Pratik save Rs 45,000, given that an investment up to Rs 1.5 lakh is eligible for deduction under this section.
Section 80CCD, 80D and 80G are some other sections that offer tax benefits. Let’s look at some last-minute options that can help you save tax.
Liquidate old tax saving investments and reinvest
You don’t need to invest more money always. Withdraw tax-saving funds that have completed the lock-in period and reinvest them to save tax going forward. Schemes such as tax-saving ELSS can be withdrawn after three years from the start of the investment. PPF on the other hand can be partially withdrawn upon finishing six years. Furthermore, the income earned from these investments and the maturity sum are also tax-free in most cases.
Buy Health Insurance Policy
Health insurance premiums are eligible for tax exemption under Section 80 (D). And health insurance is a much-needed asset in your portfolio to cater to the hospitalization bills for you and your family. So, even if it’s last-minute shopping, opt for a tax-saving instrument that adds value to your financial portfolio. Health policy premiums allow deduction to the tune of Rs 25000 for premium contributions made for children, spouse and self. For parents above the age of 60 years, you can get an additional deduction of Rs 50,000. However, the premium payment should be made in a non-cash mode to avail deduction under this section.
Buy term insurance cover
If you haven’t done the needful yet, buy a term cover to secure your family financially for a time when you may not be around. The sum assured will act as an alternative income in case you are faced with untimely demise. You must aim for a cover 10-20 times your annual income. The premium cost for term insurance is reasonably low and is eligible for deduction under Section 80C.
Invest in the National Pension Scheme
Salaried or not, NPS is a lucrative pension scheme that can help reduce your tax liability. Apart from the tax deduction of up to Rs 1.5 lakh under Section 80C, investment in NPS allows you to save an additional Rs 50000 under Section 80CCD. In a recent development, the entire corpus has been proposed to be made tax free as opposed to the previous 40%. The annuity income, however, is taxed as per the applicable tax slab. You can apply for your NPS account online by visiting its registration website.
Donate to eligible institutions
In a more self-less note, you can consider making donations to relief funds and charitable institutions. Some of these funds are eligible for tax deduction under Section 80G. The extent of the tax deduction may vary depending on the type of institution you are donating to. The deduction is allowed only when you donate to the notified entities.