Posted On: 15-May-2021
Financial planning is an important field where everyone should understand, otherwise, they will end up paying extra income tax. Before filing income tax returns there are certain things where a taxpayer can reduce his tax through several deductions with Income tax. Let's discuss what are those important fields where a taxpayer can claim tax exemption.
Under section 80C an individual can save money for his retirement to live a tension-free life, income tax act 80C gives a tax exemption for that saving amount. These savings if they pay in lumpsum or annul it will be partially taxable. These pension schemes come in different ranges of options according to the individual wish.
The Unit Linked Insurance Plans (ULIP) will be useful for this tax exemption, where an individual will be paying a monthly premium and that will be useful as an investment in an asset or saving the rest for retirement.
A life insurance policy will be useful for tax exemption where you deduct your taxable income. Under section 80C monthly premiums and payouts there will be tax exemption either it might be term insurance policy or life insurance policy. As per calculations, it will be exempted up to 1.5 lakhs if they paid as premium towards life insurance.
Loan for Education:
Under section 80C if the loan is taken for children's education then it is a tax-deductible investment. Education loans are tax-deductible as per income tax act section 80E. Tax deductions are based on the premiums or instalment paid and it is deductable up to 1.5 lakhs.
Investing in Market Linked Instruments:
Investing in National Pension scheme, mutual funds, Equity Linked Savings scheme and ULIPS are exempted from income tax act under section 80C. They are all termed as market linked instruments.
If the market-linked instruments' premium is less than 1.5 lakhs with a fixed period of 3 years there will be no tax levied on such investments.
Home Loan is an option for Tax Deduction:
Financial planning is the most important thing which we all need to consider because it saves a lot of money and opting for a home loan will be help you like anything. Under section 80C on the principal amount of the loan as well the interest amount of the loan can be deductible up to 1.5 lakhs as per the income tax act.
Diversifying your income in different routes will save a lot of income tax. Saving income tax is not a crime, it's the way we need to operate by going through different tax deductions and exemptions given by Income Tax Act. If you follow the above steps then you will save a lot of tax.