When it comes to saving on taxes, you've got a lot of options. There are many ways to keep more of your money, and there are also different kinds of i ncome tax saving schemes offered by the government of India.
In this article, we'll talk about the different income tax savings schemes offered by the government of India and how to calculate your income tax before knowing what's left with you after taxes have been taken out.
Income Tax Saving Schemes
Investing in income tax saving schemes can reduce your tax burden and help you save money for retirement. Section 80C is one of the most popular section to save taxes, as it allows investors to save up to Rs. 1.5 lakhs per year on their income tax. Essential tools for reducing income taxes include:
Public Provident Fund (also known as PPF):
This is one of the most popular income tax saving schemes that offer high returns on your investments with a guaranteed return of 8% per annum on your deposits for up to 15 years.
Unit Linked Insurance Plans (ULIPs):
First, ULIPs allow investors to claim a maximum exemption of Rs. 1 lakh per year under Section 80C. This means that you are able to earn up to Rs. 1 lakh a year in your ULIP without having to pay taxes on it.
Tax Saving Fixed Deposit:
Fixed deposits are a great way to save money while earning interest. But there's a limit on how much you can invest in Fixed Deposits each year to receive tax benefits under Section 80C.
Employee Provident Fund:
Another investment program eligible for tax benefits under Section 80C up to Rs. 1 lakh annually is Employee Provident Fund, or EPF.
National Savings Certificates (also known as NSCs):
Under Section 80C, you can utilize National Saving Certificate to generate interest that reduces your taxable income by up to Rs. 1 lakh annually.
You can invest up to Rs. 1 lakh each year in NSCs and receive tax-free returns on your investment of up to 8.5% per annum. In addition to this, the interest earned on NSCs is exempt from wealth tax and capital gains tax
Infrastructure Bonds:
This investment option permits an annual exemption of up to Rs. 20,000 under Section 80C. Investors are permitted to seek a tax exemption on interest payments of Rs. 15,000 under Section 80L. Interests are taxable.
Tax Saving Mutual Funds:
ELSS, or Equity Linked Savings Scheme, is a type of mutual fund that can be used to save money for retirement, education, or any other long-term goal.
Under Section 80C, these funds permit annual exemptions of up to Rs. 1 lakh. Through mutual funds, ELSS are standard tools for tax savings.
What exactly is an income tax calculator?
An Income tax calculator is a simple online tool that helps you estimate your tax liability according to the tax laws of the specific year. This tool only needs information like total yearly salary, rent paid, tuition fees, investments made, interest paid on loans, etc., and the calculators automatically assess your tax liability.
How to make use of the income tax calculator?
To calculate your taxes using an online income tax calculator, follow these steps:
1. Input your assessment year.
2. Select your tax-payer status (individual, HUF, LLP, businesses, etc.).
3. Enter your annual salary and any bonuses or variable pay you received during that time period. If you have any exemptions or deductions to file under 80C, 80CCD, 80G, 80E, or 80TTA, enter them here as well.
4. Select which income tax slab you belong to, old or new. Enter information regarding your investments under section 80C or other exemptions under sections 80CCD, 80G, and 80E.
5. You will know the tax payable for the year.
Points to keep in mind
It's a great idea to save on taxes. But with so many options available, it can be hard to know which one is right for you.
The Indian government offers income tax saving schemes as a way to incentivize investment in certain sectors of the economy.
Final word
Income tax saving schemes are a safe option for your savings if you have no other investment avenues available or if you want to invest in something other than equity or debt.
