A mail pops up from the accounts department of your organization. The subject reads ‘Submission of Proof towards Investment Declaration for Financial Year 2018-19’.
You’re shaking in your boots as you realize you haven’t made a single investment and have been wary of all things related to finance and taxes. Let’s admit it. Taxes can be stressful. We don’t blame you. Even Albert Einstein who came up with the theory of relativity regarded income tax as the hardest thing to understand in the world.
With only a handful of days left, making last-minute tax savings can seem like a herculean task. Thankfully, you might already have a few things at hand that can help in tax-saving deductions. These simple yet effective last-minute tax saving tips can help you save on deductions, and then some more!
1. Your bachelor pad can help you with your tax savings
Depending on your salary structure, your company might offer a partial or complete exemption from tax on the house you’ve been renting. You can claim for deductions on House Rent Allowance under Section 80GG.
Don’t forget to keep the PAN details of your homeowner to get tax benefits on HRA.
2. Finally decided to purchase your dream home? Even better!
New homeowners can cheer in delight! You can claim up to a maximum of ₹2L for deductions from your home loan under Section 24. If that’s not enough, you can claim an additional deduction of ₹50,000 towards interest payments of your loan under Section 80EE (every financial year).
Married? Your spouse can also claim benefits for the same housing loan. That makes it a sweet benefit of up to ₹4L!
3. Who knew studying can save taxes?
For all the past graduates who are repaying their education loan, you can get tax benefits on the interest paid for the loan under section 80E.
Since there is no cap on the maximum amount on deductions, the total interest of the loan paid can be filed as deductions itself. (Total life saver!)
4. Mutual funds can be promising
Because of the higher returns of investing in the equity markets, ELSS or Equity-linked Saving Scheme is a popular mutual fund option to save taxes. You can get tax benefits up to ₹46,800 by investing up to Rs 1.5L every year. Make sure you have enough money to spare, as ELSS has a shorter lock-in investment period of 3 years compared to other schemes.
ELSS is a great option for only those who are open to risk and don’t mind their money locked-in on investments for a while.
5. “Why haven’t you already invested in PPF?”
Said every dad ever. The chances are that you’ve already heard of the Public Provident Fund from your parents. The reason why PPF is such a popular scheme is because of its EEE (exempt, exempt, exempt) status. You can enjoy a triple exemption advantage that includes no-wealth tax, tax-free returns, and deductions on deposits. Since there is no risk of capital depreciation or late interest, PPF is your super tax-saving scheme!
To get started with PPF, all you need is a minimum contribution of ₹500, your documents and you’re set.
6. Your dream retirement plan can help you cut down on taxes too
That hammock-by-the-beach-house dream will come true someday. To make it happen, you can start by investing in the National Pension Scheme (NPS). While previously open to only central government employees, NPS is an attractive scheme that is now open to all. Individuals can invest early and get significant tax benefits of up to ₹2L under Section 80CCD.
With a longer lock-in investment period and a minimum contribution of ₹500, NPS is the perfect retirement investment for you.
7. Investing in medical insurance can go a long way, literally!
Medical bills are unavoidable and they’re going to be never-ending and expensive. It’s always a good idea to invest in life or medical insurance. Besides the tax-saving benefits, you never know when an unforeseen medical emergency might come your way. You can claim a maximum deduction up to ₹25,000 under Section 80D for medical premium installments.
You can also claim up to ₹5,000 (per financial year) for all those ailing visits to the doctor or preventive check-ups.
8. Tax-saving fixed deposits to the rescue!
A simpler and attractive avenue for saving taxes is to invest in a fixed deposit scheme. With banks offering a multitude of different schemes, you can invest and claim up to ₹1.5L as tax deductions under section 80C. Since the lock-in investment period is 5 years, you cannot withdraw the money before maturity of the scheme.
Depending on the bank, the rate of interest can range from 5.5% to 7.75% and can be transferred from one bank branch to another.
You can finally take a breather, you still have time. Don’t forget to plan and invest carefully for the next financial year.