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- Investment in Public Provident Fund (PPF)
Investment in PPF is the most popular tax saving tools for salaried individuals because of its zero rated risk and the “three – way†exemptions associated with it: the “principal amount†invested is eligible for deduction under Sec 80C to the extent of Rs.100000, “interest†accruing thereon @ 8.6% is exempted u/s 10(11) and the “total amount†withdrawn is also fully exempt from tax. In other words, you earn more than what you invest, that too completely tax free.
- Availing deductions under Section 80C
Section 80C gives every income tax payer up to a maximum of Rs.100000 tax free income in a year if they invest in or buy tax saving instruments, which includes Premium for Life Insurance or ULIP, National Savings Certificates (NSC), Equity Linked Savings Schemes (ELSS) of Mutual Fund Companies, Tax Saving Fixed Deposits with Banks etc.
- Availing deductions under Section 80CCF
80CCF offers a deduction of Rs.20000 for investments in long term infrastructure bonds which would be deductible from the taxable income. This deduction will be over and above the existing overall limit of tax deduction on savings of upto Rs.1lakhs under section 80C, 80CCC and 80CCD of the Act. This is a very lucrative opportunity available to individuals as now they can lower their income directly through investment by Rs.120000.
- Home Loan benefit
It is always advisable to get a home loan and avail the “2 – way†benefits associated with it. In other words a salaried individual can own a house without paying lump sum from pocket thus saving interest and at the same time pay the installment and avail deduction on both the principal (under 80C) and interest (Sec 24b) part.
- Tax benefits on Premiums paid under different policies
- Premium paid towards Life Insurance premium is eligible for deduction upto Rs.100000 under Section 80C.
- Premiums paid for Pension / Annuity plans are entitled for deduction under Section 80CCC.
- Premiums paid for medical / health insurance of self, spouse and children or parents are eligible for deduction under Section 80D. The general deduction available to each taxpayer is Rs.15000, for self, spouse and children. An additional deduction for parents (dependent or independent) is Rs.15000. If the amount paid is for a senior citizen, then one can claim an additional exemption of Rs.5000.