Tax Saving Options That Every Taxpayer Should Know
Tax saving is essential to an individual or family’s financial planning. An individual or family (especially middle-class) search for various tax saving options to secure their life or notable investment for future life. This blog will help you to re-calibrate your financial planning. Here you’ll find the perfect recipe of tax deductions and various other tax-saving options to create an ideal future financial plan. Most people without thinking twice started to invest in premiums, life insurance, and FDs. In these cases, they should be cautious while choosing a plan because sometimes it may give them financial headaches due to the monthly payment interest. Also, you cannot stop in the middle once you start investing. Therefore, this blog will give a perfect dual financial integrated plan of tax deduction + tax saving options. Stay tuned!
List of Best Tax Saving Options for 2024 Financial Planning
Before we go for the tax deduction advantage. Let us first go through some of the best tax-saving options for your 2024 financial planning. These tax investment options will help you boost your savings for the long term with low risk.
Here is a list of the best tax investment options to grow your maximum tax benefits.
| Tax-saving investment Options U/S’s | Tax-saving investment Options U/S’s |
| Life insurance | S-80C (Premium) S-10D (Death/Maturity) |
| Pension Plan | S-80C u/s 80CCC |
| Health Insurance Plans | S-80D |
| NSP | S-80CCD |
| Mutual Funds | S-80C & S-10D (Death/Maturity) |
Tax Saving Investment Plans in Detail
Other than Table 1, Several other low-risk tax-saving benefit plans are available. Here is the list of various tax-saving investment plans and instruments those are as follows;
Fixed Deposits
This is one of the best tax-saving options, you can begin your financial journey. FD (Fixed Deposits) are low-risk market instruments having a high-interest term period with a high interest rate of 5.5%-7.75% (currently). The interest rate on FD may vary from bank to bank but under the guidelines of RBI. FDs are counted under the ITR Act 1961 under section 801c and fall under the tax deduction category.
Therefore, Investing in FD will be a good start. Up to ₹1.5lks of deduction is applicable on your FD. This plan is best for the long term which will be under a lock-in period of 3-5 years and tax will be applicable on FD’s interest earned.
Public Provident Fund (PPF)
The public provident fund is another long and short-term investment tax-saving option. According to the NSI, you can start your account with a minimum deposit of ₹500/- up to ₹150000/- maximum during the FY. PPF accounts can be opened from any nearby post office or any bank (public and private). PPF provides a flexible withdrawal facility every year within the 7th FY. Facilities like loan approval and account extension after maturity are available. The PPF deposits fall under the ITR Act 1961, u/s 80c deduction.
ULIP (Unit Linked Insurance Plan)
It is a long-term investment tax-saving instrument that provides you the independence to opt for equity, debt funds, etc. ULIP is an excellent instrument to switch, funds while syncing your financial plan with low risk. ULIP falls under sections 80c and 10 (10d) of the ITR Act 1961. Therefore, deductions apply to the interest earned by ULIP.
National Saving Certificate
NSC is an opportunity for those who want to choose an option over FD because NSCs offer higher interest rates than FDs. According to the NSI, one can open an account with a minimum deposit of ₹1000/- and a maturity period of 5 years. With a limitless deposit, NSC falls under section 80c of the ITR Act 1961 applicable for a tax deduction. This is one of the best schemes for middle or lower-level-income individuals. One can save up to ₹1.5 Lks under tax deduction.
Senior Citizen Saving Scheme
SCSS is a superb scheme for salaried individuals above 60 years. This is a government initiative scheme for those who want a sustainable solution of secure income. The principal amount of SCSS comes under section 80c of the Income Tax Act 1961 under the old tax regime. Tax deduction + Secure income is the perfect combo for any post-retirement individual above 60 years.
Life Insurance Plan
LIP falls under sections 80c (premium up to ₹1.5lks) and 10(10d) death/maturity of the Income Tax Act 1961. A family or an individual opts for a secure, aftermath life of uncertainty. LIP offers security to his/her family even after the death of the housemaster. The deduction is applicable if any LIP, is terminated/discontinued within 5 years and taxes are applicable accordingly. There are several variants of a LIP those are as follows; Term, Endowment, ULIP, and Money-back plans.
Pension Plan
A pension plan is a different form of plan. A pension plan is unique from other life insurance plans like endowment plans and term plans, which are referred to as protection plans, and serve different purposes. The purpose of the pension plan is to serve the individual and the family of the individual if continues to live on where as the aim of a protection plan is to serve the individual or the individual’s family after the death of an insured individual.
The section 80CCC, (sub-section under section 80C)of the Income Tax Act covers the donation towards the pension plan-insured individual. According to the Income Tax Act of 80C, the total deduced limit is up to 1.5 lakhs, under all the sub-sections of the Income Tax Act.
Under the Pension Plan Policy, one-third of aggregated pension money is tax-free, and the remaining two-thirds amount is considered, pensioners’s income. It’s taxed at a marginal tax rate. The allocated amount becomes tax-free under the condition of the pensioner’s death.
Health Insurance or Mediclaim
A famous plan for life insurance refers to health insurance or medication that covers the whole post and pre-amount of an accident or hospitalization under the allocated insured amount.
Mediclaim or Health Insurance provides numerous benefits for the policyholder and the holder’s family under section 80D. For senior citizens, the premium insurance is up to twenty thousand rupees, and for others, it is 15,000 to be applicable for tax benefits.
On paying the insurance premium of 15000 rupees for self and 20,000 for senior citizens, the policyholder is eligible and can claim the benefits of a tax on the total allocated money.
The aggregated money value is tax-free on maturity under the condition of serious sickness insurance policies.
Tax-saving Mutual Funds
Expenditure in (ELSS), an equity-linked saving scheme, refers to a Tax-saving mutual fund, that passes the criteria for tax benefits. Tax-saving mutual funds outlay on stock marketing, in comparison to other assets. Moreover, tax-saving mutual funds are beneficial, for those who take risk-taking investing for three whole years. This comes under section 80c of the Income Tax Act 1961. The expenditure in the tax saving act covers up to an aggregate amount of 1.5 lakhs. Under section 10(D) on maturity, the tax is free and press on death.
Tax Deduction Under The New Tax Regime 2024-2025 on Housing Property
The government provided provisions for relief on the taxes. Tax deductions play a major role in promoting the saving of an individual’s wealth. Saving is an internal part of any financial planning for personal growth in the future. Therefore, in the Income Tax Act 1961, there are provisions for deduction on capital gain tax or income tax. Those are as follows;
Deduction on Income House Property
Investment in housing property is one of the best long-term and secure capital investments for an individual. However, several deductions are applicable according to the Income Tax Act 1961.
- Under section 24(b) deductions are allowed on interest earned from housing property for renovation or loan.
- Maximum deduction up to ₹2 lakhs for housing loan. (only under the old regime)
Under/section 24(b) interest on loan table;
| Property Nature | Date of loan taken from 1/04/1999 | Loan purpose | Maximum limit |
| Self | On or after | Construction or purchase | ₹ 2,00,000 |
| On or after | For Repairs | ₹ 30,000 | |
| Before | Construction or purchase | ₹ 30,000 | |
| Before | For Repairs | ₹ 30,000 | |
| Let Out | Any time | Construction or purchase | Actual value without any limit |
Tips to Plan for Tax-Saving Financial Investment for FY
The main purpose of a tax saving plan is to evade taxes as much as possible in a legal fashion. The financial year of every organization starts from April 1st. Start the preparation of your tax-saving investment with a proper plan of action in April.
Why should you start from the Financial Year?
The financial year is crucial for every profit-making organization. The government may bring new incentives for the companies to boost the economic sectors. You can take advantage of those new incentives and plans. One can take the example of budget 2024 where the government introduced new plans and benefits for salaried individuals. Whenever you opt for any investment tax-saving plan, it is smarter to prepare from the early quarterly year (April). Before opting keep a few factors in mind; Fund Safety, Liquidity, and ROI.
Conclusion
Every salaried and nonsalaried individual has the right to use the exemption legally and the privilege to save income from taxes. This is beneficial for the economy and personal development. Under the exemptions for deduction under section 80c of the Income Tax Act 1961, integrate with your investing tax saving options carefully, for higher ROI. Remember your only purpose is to reduce tax on interest on your income (capital or salary) and save as much of deduction as possible.
