Tips for Income Tax Planning

As the season for tax-filing nears, you may be in a rush to begin tax-planning. Not planning you taxes effectively through the right strategies can lead you to paying more in taxes than you otherwise would have to. Tax planning is undertaken by individuals, businesses and organizations through assessment of the financial profile. Irrespective of whether you are a first-timer or veteran tax-payer, you must plan your taxes well. Not only is it important for managing your personal savings, but also promoting the economic activity of the government.

Here are some investment tips that you can use for planning and saving on income tax:

Equity linked saving schemes (ELSS) – ELSS or Equity linked saving schemes is a type of investment that includes a diversified equity mutual fund with a large part of the corpus invested in equities. The investment in ELSS can be made in a big lump sum amount or you can opt for the SIP route. The returns from the equity market are reflected on the ELSS fund. Equity linked saving scheme funds are considered to be extremely beneficial as they not only carry a considerable amount in returns, but also allow for tax savings. Under the Section 80C, you can enjoy tax-saving of up to INR 1,50,000.

Employee Provident Fund (EPF) – The salaried employees of the country are eligible for opening an Employee Provident Fund. Under this retirement benefit scheme, the employee deducts a percentage of the basic salary with a Dearness Allowance (DA). This amount is then deposited into the EPF account. When the EPF is withdrawn after continuous service of 5 years, you can enjoy tax-free benefits.

Making donations – Contributing towards donations is a good way to save on taxes. If you make donations to charitable organizations or an NGO, you can claim Income Tax benefits under Section 80G of the Income Tax Act.

Purchase a health insurance policy – According to Section 80D of the Income Tax Act, the premium paid on health insurance is eligible for income tax deductions. You can avail of this benefit when you purchase a health insurance cover for yourself, spouse and dependent children.

Medical bills – The medical expenses make for a good way to save on taxes at the end of the year. Medical receipts may be presented for tax deductions of up to INR 15,000. The same is applicable on medical expenses incurred for yourself, spouse and your dependent children.

The above stated ways are extremely beneficial in tax planning and allow you to avail great savings on your income tax.

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