Only a week's time is left for the financial year ending and if you are also among those who plan on saving tax at the last minute, here are some of the simple options you can explore:
But before we go any further, it is to be noted that the tax regime you have opted for will have a bearing on your deductions. Notably, in the previous year's budget, the government introduced a new tax regime which offered a lower tax rate but for it the taxpayer would have to forego several of the deductions and exemptions available in the old tax regime.
Nonetheless if you stick with the old tax regime, here are simple ways to reduce your income tax pay out:
1. Go for preventive health check up before the year end and get tax benefit:
As there is again a threat of being infected by the lethal coronavirus in the country, what might be the better way to help you save tax then going for a preventive health checkup? These checkups provide tax benefit on the amount incurred on them.
Within the 80D deduction offered in respect of a health insurance plan bought for self and family, you also are entitled to a tax benefit on the amount spent on preventive health check up. Here the tax benefit is up to Rs. 5000. And the benefit falls within the overall deduction allowed of up to Rs. 25000 per year or Rs. 50000 in case of a senior citizen.
This benefit is also available in case the payment for preventive health check up to Rs. 5000 is paid via cash. Note the tax benefit against health insurance premium is available only if the payment is made in non-cash i.e. through cheque, net banking or any other digital route.
2. Invest in a pension plan:
For the premiums paid towards a new, renewed pension plan or an annuity plan offered by an insurance company, you can claim a deduction. In addition for the NPS scheme, apart from the deduction allowed under 80C, if one subscribes to the scheme voluntarily then an additional deduction of Rs. 50000 over Rs. 1.5 lakh shall be extended under Section 80CCD (1B).
Furthermore, a deduction of not over 10% of the salary or 20% of gross income in case of self-employed can also be claimed if one has investments in NPS.
3. Equity linked savings scheme:
For claiming tax deduction that is available under Section 80C and at the same time getting equity like return one can invest in ELSS funds which are a type of mutual funds with a shorter lock in period of 3 years. ELSS funds invest 80-100 percent of their corpus in equity and hence carry a degree of market risks. Nonetheless one can earn a higher return than other investments covered under 80C including provident fund etc.
4. Money in your savings account also help you save on tax outgo:
Interest from the savings account held in a bank or post office can also be claimed as deduction up to a maximum of Rs. 10000 under Section 80TTA of the Income Tax Act. Note that this relief is not available on interest income from FDs, RDs and bonds. However the same is extended in lieu of post office deposit held for 5 years. Also, senior citizens aged 60 years and above can claim a deduction of up to Rs. 50,000 on FD at bank or post office.