Written by : AK Agrawal

An experiences Chartered Accountant and Techno-Functional consultant working in industry for over 10 years dealing with multinational corporate clients. He is loves reading latest trend of technology trend.

Investments That Can Be Claimed for IT Deductions

AK Agrawal
AK Agrawal, Chartered Accountant

Dec 20, 2021 16:33

Saving money is your way out of uncertainties in life. Tax planning can help you with expanded choices and give the desired peace of mind. It is no new news that in a financial year, you can take investment for IT deduction as per the 80C or 80CCC of Tax Act. Because of this, many young money thrifts are interested in investing but are still backed off with the potential risks involved. Taking this into account, this article further explores the claims of the investment for IT deductions. We are going to look at the attractive investment schemes and regulations that can spur your interest.

Before we begin, let us take a sneak peek into the fundamentals of income tax. Every individual with a fixed income is obliged to pay income tax to the government of India. Even though it is an unavoidable tax liability, there are still ways to unveil deductions on the prevailing tax money. We generally call these ‘tax-saving instruments”, and you can take advantage of this for selected investment options and expenses.

How to make use of sections 80C and 80CCC?

Most of the parameters of investments for IT deductions are mentioned in the Online Income Tax Act – under section 80C. To save under this provision, you can invest Rs 1.5 lakhs to cut your taxable payments. Along with this, to optimize your deduction, invest in NPS as per 80CCD (1b) to claim Rs 50,000. Hence a total of Rs1,50,000 can be reduced from your tax liability by increasing the frequency of your investment hobby. Additionally, you can also get medical Insurance to get a deduction of Rs 1,00,000 under 80D. Deduction (a maximum of Rs 50,000) can be also availed on Home Loan interest under 80 EE.

Now take a look at the following investment for IT deductions to get exemption;

ELSS (Equity Linked Saving Scheme) – This comes under mutual funds and is distinguished by its deduction of 1.5 lakhs. The interest rate of this scheme will come between 15%-18% and the lock-in period is 3 continuous years. But what you need to consider is its returns. This investment for IT deduction does not offer fixed returns, as it differs according to market trends. However, according to this scheme, you can opt for a dividend (10% taxable) or a growth option (more return). You can also diversify your investment by applying for multiple ELSS which will help you increase your liquidity.

Fixed deposits – FDs serve as security deposits and have guaranteed return options. However, the tenure of FDs is 5 years hence, premature withdrawals are not possible. Fixed deposits provide tax-free income and are ideal for individuals who are looking for long-term benefits. You can claim up to 1.5 lakhs on FD and even earn more than savings.

Life Insurance – Even though it is an attractive way to save money, we do not recommend getting life insurance just for the sake of tax benefits. In insurance coverage, the premium you paid and the following maturity payments are tax-free. In addition to that fund, the endowment is also free of tax under section 80C and 10(10D). If you are an unmarried individual or a single earner couple aged between the late 20s and early 30s, then you can get a term income insurance cover with 15 to 20 times of your yearly salary to get tax exemptions.

Senior Citizen Scheme - All adults above 60 years are eligible for the application of this scheme. You can pay a one-time minimum money deposit of Rs 1,000 and invest a maximum amount of Rs1.5 lakh for joint holdings and Rs9 lakhs for single holdings. The average maturity period is 5 years, and get Rs1.5 lakhs as tax deductions. Furthermore, under this scheme, you can make premature withdrawals - a key reason for its hype.

Public Provident Fund (PPF) – This is an interesting scheme facilitated by the government to enhance your retirement funds if you wish to make investments for IT deductions. PPF is one of the most secured investment funds and enjoys EEE benefits that are exempt, exempt and exempt. Hence it is also ideal for single individuals between their 20s and 30s. Hence, the money you give, the interest acquired, and the maturity that comes after are all deductible income. In spite of this, the risk factor is stable, and the tenure is 15 years. You can claim Rs 1.5 lakhs under this scheme and can range the maturity date to extra 5 years.

National Saving Schemes - NSC is identical to FD and is provided by the government of India. It can be initiated with any post office and is regarded as a fixed income tax saving instrument. The maximum limit is 1.5lakhs under the IT act. The maturity of NSC is 5 years and is a completely transparent financial paradigm.

National Pension Scheme – NPS is the all-time favourite choice of investors to get heavy tax exemption. Under this, your contribution is eligible to make an Rs1.5 lakhs tax exemption, and an extra Rs 50,000 can be claimed under 80CCD Act. The tenure is your retirement date. If 10% of your income is automatically taxed, then the money will be free of tax. You can start to save from your late 20s to amplify the amount.

Other investment options for IT deductions

Medical insurance– This will help senior individuals to save up to Rs1 lakh under 80D. You can also take cancer cover under this. On the contrary, if you can only Rs 50,000 for self-spouse and children.

Interest paid on home loans – A maximum of 2 lakhs can be claimed on interest paid on home loans. Section 80EE gives you a deduction of 50,000 on loans above the threshold of Section 24.

Home loan – Taking a home loan can also help you condense your tax liability, and you can claim up to Rs 1.5 Lakhs of the home loan under Section 80C.

Charity funds – If you have paid charity to any renowned institutions, you can claim it under the 80G provision.

Interest paid on education loan – if you have taken an education loan and paid interest, then you are eligible for deductions under Section 80E

Optimize your investment for IT deductions with Gotaxfile!

There is nothing more satisfying than taking investment for IT deductions. It can save you a lump sum and help you achieve your dreams without expanding your current financial framework. Instead of pushing it to later, try to do it early to find such exemptions and tax-saving income. To know your best options, you can contact Gotaxfile professionals who have sound knowledge in taking advantage of investments of IT deductions. We will help you get tax exemptions and augment your chance to make tax-free income. Get in touch to know more!

AK Agrawal
AK Agrawal, Chartered Accountant

Dec 20, 2021 16:33

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