We list a few ways to help salaried persons save tax.
There are times when high living expenses and rising inflation make you rethink your expense budget. Try as you might, you cannot cut down on essential expenses, and there are investments and savings funds to create as well. At the end of the financial year, you feel that you pay too much tax. So, you start scouting for ways on how to save tax with legal means.
The good news is, various tax saving investments give rebates as well as secure your future. We list a few of these tax saving options for salaried persons:
Buying life insurance serves two important purposes: It protects your family’s future in your absence with the policy money, and it offers a tax benefit under Section 80C of the Income Tax Act, 1961. The premium you pay towards life insurance – term, ULIP (Unit Linked Insurance Plan), endowment, money back – is tax deductible up to Rs 1,50,000 per year. So, you end up safeguarding not just your future but save tax as well.
* Invest in ELSS
Another great tax saving option for the salaried is the Equity Linked Savings Scheme (ELSS). The ELSS is a high growth mutual fund scheme that is quite popular among investors wanting good exposure to the equities market. You can save tax up to Rs 1,50,000 under Section 80C for investing in the ELSS. The exemption is granted whether you make a one-time payment or an annualised pay-out. It is a great tax saving investment since the returns are also tax-free.
* Buy health insurance
If you are wondering on how to save tax under another section of the IT Act rather than Section 80C, then you should consider buying health insurance. Health insurance protects your savings and income from the high costs of taking medical treatment for yourself or your loved ones. Meanwhile, it is a good tax saving option for the salaried as well – you can claim a rebate for premiums paid for the health plan under Section 80D, up to Rs 25,000 per year. You can claim up to Rs 50,000 for premiums paid on the policies in your parents’ name. The premiums may be paid for health insurance for yourself, spouse, dependent parents or children.
* Take a home loan
Buying a home at a time when real estate prices in India is prohibitively expensive, is possible with the help of a home loan. Not only does the loan finance the house purchase, but it is also a good tax saving investment as well. You can claim deduction and save tax under Section 80C for principal loan repayment of up to Rs 1,50,000 (increased to Rs 2,00,000 for senior citizens). Meanwhile, you can claim the deduction on the home loan interest paid to the bank, up to Rs 50,000 under Section 80EE.