Once you have exhausted the limit of 1 lakh allowed under 80C, what next? This is an important question for most taxpayers. Usually, investors stop at 80C because of a lack of awareness of other investment options that help to save tax.
Anyway, don’t worry if you have used up your limit to save tax under section 80C because there are other options to save more tax. However, most people are unaware of these options.
Section 80 CCF Additional Rs. 20,000 on investments towards approved infrastructure bonds
Subscription to long-term infrastructure bonds is exempt from the assessment year 2011-12 onwards. This allows an individual to invest an additional 20,000 in infrastructure bonds and have that amount deducted from taxable income in addition to the 1 lakh deduction under 80C.
Section 80D: Get medical insurance cover for you and your family
The deduction is available for payment of medical insurance premium up to 15,000 for self/family and up to 15,000 for insurance of the assailable parents. The premium plan is to be paid by any payment options, and the insurance scheme should be given by the General Insurance Corporation of India and approved by the Central Govt. or Scheme framed by any other insurer and approved by the Insurance Regulatory & Development Authority.
- One can claim the total of the following items for deduction under section 80D
- Maximum of 15000 for assessee, spouse, and children.
- Another maximum of 15000 for dependent parents. Note that maximum of 20000 if the dependent parent is a senior citizen.
Section 80E: Higher education loan
The deduction is available for the interest component of a loan taken from a financial institution or approved charitable institution for higher studies. The payment of the interest thereon will be allowed as a deduction over a period of up to 8 years.
Further, by Finance Act, 2007 deduction under this section shall be available for pursuing higher education by self and by spouse or children of the assessee. Higher education means any study pursued after passing the senior secondary examination or its equivalent, which is called higher education.
Section 80G: Donation to certain funds, charitable institutions
Donations made to funds like the Prime Minister’s Relief Fund, the National Children Foundation, any University or educational institution of ‘national eminence,’ etc., are deductible from taxable income according to section 80G. Contribution to exempt charities is deductible depending on the charity and as per approval.
Section 24B: Invest in house property
Investing in a house is considered one of the best tax-planning tools due to various tax benefits given under the Income Tax Act, 1961 Of India. A deduction of interest component of home loan is available under section 24B, with a maximum limit of 1,50,000.
The deduction allowed on the principal part of repayment is 1,00,000 (Section 80C). Thus the total deduction an investor gains while taking a home loan is 2,50,000.
Section 54EC: Buy Capital Gain Bonds (NHAI and REC bonds)
An investor having long-term capital gain from the sale of an asset can either invest the capital gain amount in Section 54EC bonds (currently being issued by REC and NHAI), thereby saving the entire amount of tax, or actually paying the tax and invest the balance in quality equity funds.
It may be noted that these Section 54EC bonds may be used to save tax on any long-term capital gain and not necessarily from the sale of a property. For example, the sale of non-equity mutual funds, bonds, debentures, gold, jewelry, or even gold ETFs may result in long-term capital gains. Such gains may be saved by investing the capital gain amount in the 54EC bonds.
The drawback to these bonds is that the maximum investment in any one financial year is capped at 50 lakhs. The interest currently is 6% per year; that too fully taxable. Moreover, the money is locked in for 3 years.
However, the upside is that on account of the tax savings, the bonds effectively offer the investor an up-front 20% savings, and at the end of three years, he gets his original investment back. Thus the gains outweigh the drawbacks.
Finally, the key to investing prudently is to keep in mind the long-term savings aspect and not just the current tax savings. So spread your savings in multiple baskets with varying profit/risk profiles so that in case of a market downturn, you can average your risk exposure.
How Good To Invest For Tax Saving?
Most people never know how investment can save their tax, but you should have proper guidance to reinvest your money and keep safe from tax only if you are from India.
Every time whenever you invest your money, you should always consider long-term plans to buy because every short plan can lose your money, which is why your investment should be on proper term plans, which will give you profit on taxes and reduce your tension.
Bonus Tips To Save Taxes With Investment
- Always Stay In Touch With Your Financial Advisor Before Buying Plans
- Do Market Research Before Buying Any Term
- Never Buy Short Term Plans For Saving Taxes
- Think Before Investing Your Money
- Learn Risk-Management In Investment Plans
I have mentioned how and why you should save your tax after 80c in India, and these plans are helpful to keep save your money, and you can be tax-free after your retirement. The best thing is while paying a term plan; you need to calculate your profit and loss.
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