Last Minute Tax Saving Guide

If you have recently joined the working class of the country and have no clue about how the whole taxing system works, there are a few things that you must know. If you are getting paid above Rs.2,50,000 per annum, you will be taxed on your income. And like every newb, it will take you time to completely understand where you have to invest to claim for deductions and save on tax. Read on to know the last minute tax saving instruments that you can invest in. The following instruments can be used by those who are lazy to plan their investment through the year as well.

80C Investments

80C investments are the most common deductions. The maximum limit under this deduction is Rs.1,50,000 per annum. The instruments that let you avail 80C deductions are as follows:

  • PPF:

    It is a fixed income security plan offered by the government. You get 8.8% interest on the savings. The lock in period is 15 years and the maximum amount that can be invested is Rs.1,50,000.

  • Life Insurance Premiums:

    If you are paying premium for yourself and your dependents, you will get deduction under Section 80C for the premium paid.

  • NSC:

    This scheme is designed especially for the IT Assessees. There is no maximum limit for the investment. The tax is also not deducted at source. NSC can also be kept as a collateral to get loans from banks. The rate of interest offered is 8.50%.

  • 5 Year Tax Savings FD:

    The lock period for this FD is 5 years and you cannot make any premature withdrawals. The rate of interest varies from bank to bank.

  • ELSS:

    ELSS offers market linked returns. The lock in period is 3 years and the dividends earned are tax free.

  • Pension Plans:

    The premiums paid for pension plans are eligible for deductions under Section 80CCC. The maximum limit for deduction under Section 80C and 80CCC is Rs.1,50,000.

  • Senior citizen Savings Scheme:

    The current rate of interest for SCSS is 9.20% per annum. The interest is paid quarterly. But the interest is chargeable by tax.

  • Home Loan Repayment:

    If you have taken a home loan and are paying EMIs, the EMI amount qualifies for deduction under this section.

  • Tuition Fees Paid:

    Tuition fees that are being paid for your children is also eligible for deduction under this section.

80D Investments- Medical Insurance policy

Up to Rs.15,000 deduction is available for the medical insurance taken. If your spouse or you are over 60 years, then the deduction available is Rs.20,000. Additional deductions of Rs.15,000 is available if you are paying the medical insurance for your parents if they are below 60 years of age. If your parents are above 60 years, then you can get deduction up to Rs.20,000. The maximum deduction available under this section is Rs.40,000.

80DDB Investment – Medical treatment of certain illness

Deduction up to Rs.40,000 is available if the assessee is getting treated for a specified disease. The deduction is available if the dependant of the assessee is getting treatment for specified diseases. Senior citizen can claim up to Rs.60,000 and it is Rs.80,000 for very senior citizens.

80E Deductions– Interest paid on Education loan

If you are paying interest on higher education loan taken for yourself, spouse and children or for a child that you are a legal guardian, then you can claim deduction under this section.

80EE Deductions – Interest paid for home loan

If you are a first time home owner and the value of the first house is Rs.40 lakh and the loan taken is less than Rs.25 lakh, then you can get deduction of up to Rs.1 lakh under this section.

80TTA Investment – Savings account

Interest earned on savings account of up to Rs.10,000 is deductible under this section.

80G Investment – Donations made to charitable institutions

Various donation made towards social causes are eligible for deduction. The deduction can be either 100% or 50%. If the donations are above Rs.10,000 in cash, the deduction will not be applicable.

80GG Deduction – House rent paid

The deduction available for a house rent paid is the least of rent minus 10% the total income, house rent allowance offered or 25% of the total income.

80DD Deduction – Rehabilitation of handicapped dependent relative

If you are taking care of a handicapped relative, you can get Rs.75,000 deduction if the disability is 40% or more but less than 80%. If the disability is more than 80%, you get a fixed deduction of Rs.1,25,000.

80U Deduction – Person suffering from physical disability

If you are suffering from physical disability, then you get a deduction of Rs.75,000. If the disability is severe, you get a deduction of Rs.1,25,000.

80GGB Deductions – Contributions given by companies to political parties.

If an Indian company contributes to a political party or an electoral trust, deductions are allowed under this section.

80GGC Deductions – Contributions made by an individual to a political party

If an assessee contributes to a political party or an electoral trust, deductions are allowed under this section.

80RRB Deductions – Deduction for income by way of Royalty of a Patent

If the assessee is receiving royalty for a patent that he or she has registered, deduction available is up to Rs.3 lakh or the income received. The assessee must be an individual resident who is the patentee.

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