80 is not a good number when we are talking about age but 80 is lucky number when we talk about Tax Payers. It seems most of the tax savings are available under article 80. We will take a look at some of the tax saving schemes under section 80 and its sub-sections. You can use the explanation below for doing your tax planning as it will make your savings look even more promising. If you are an informed investor and have sound knowledge of financial market you can reinvest this amount to generate good returns.

 Deduction of 1 lakh under 80C:

80C is the most widely utilized section for tax deduction. Individuals can claim deduction up to Rs 1 lakh under this section. There are many options available for investment. The options to avail for tax deduction are the following.

Instruments

Average returns

Details

EPF

8.50%

Employee provident fund. Almost all companies provide this option.

PPF

8.00%

Limit is 70,000 per year. Lock in period is 15 years.

NSC, Post Office, KVP

7.5% - 8.0%

These are Government schemes. The interest is taxable.

ELSS

12% - 18%

This is mutual fund. The lock in period is 3 years.

Term deposit

8% - 10%

Individuals can use term deposit scheme offered by banks. The lock in period is 5 years.

PPF and EPF are tax free investment; even the interest earned is tax free. Moreover, these are safest investments backed by guarantee by Government. Everyone should invest in EPF and PPF. In almost all cases, EPF is directly done by companies. Investors can invest in PPF through any bank.

Other Government backed investments are NSC, KVP, and post office MIS. These are safe investments but the interest earned is taxable.

ULIP is also a good option. Investors should check the features or ULIP to understand it better as ULIPs vary in their structure, fees, and returns.

ELSS funds are mutual funds which can be used for long term investment as well as for saving taxes. The lock in period is 3 years. The returns are market linked and hence the risk is higher in ELSS. If investors want to earn good returns from ELSS, they should invest for longer term.

 

Deduction under 80C on Interest and Principal on Home loan

Deduction is available under 80C on home loan repayment. Deduction can be claimed on 1 lakh of principal payment and 1.5 lakhs of interest payments. However, the deduction on principal is applicable under 80C where the maximum limit is 1 lakh.

 

Deduction under 80E on Education Loan

If you have taken education loan, you can save taxes on the payment. Under section 80E, you can deduct interest on education loan from your income to save taxes.

 

Deduction under 80D on Health Insurance

Health insurance can also save taxes. You can claim deduction of Rs 15,000 under health insurance under clause 80D.

 

Deduction under 80DD on disable dependent

If individuals have dependent who are disabled, the expenses can be used for tax deduction under section 80DD. The amount can be between 50,000 and 1 lakh based on how severe is the case.

 

Deduction under 80G on donation

People, who donate for charitable causes, can claim tax benefit on the amount donated. The deduction can be claimed under 80G.

 

Changes in tax regime

There will be change in tax regime in 2014. Government will bring DTC which will change many provisions applicable in this article. We will keep an eye on the new provisions and update tax payers accordingly.

 

 

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