Income Tax News: Best Tax Savings Options for 2024! Fixed Deposit To Mutual Funds, Check Them Out Here

Income Tax News: A key component of financial planning is tax savings. A clever tax-planning approach can accomplish the dual purposes of assisting people in reaching their financial objectives and reducing their tax liability.

Fixed deposit

Investing in tax-saving fixed deposits, which qualify for a tax deduction under section 80C of the Indian Income Tax Act of 1961, can help you save money on taxes. Investing in tax-saving fixed deposits allows you to deduct up to Rs. 1.5 lakh from your taxes. These FDs have a five-year lock-in period, and the interest accrued is taxable. Typically, the interest rate falls between 5.5% and 7.75%.

PPF (Public provident scheme)

For tax savings, the Public Provident Scheme is a well-liked investment option. A PPF account must first be opened at the post office or specific branches of public and private sector banks. It is a long-term savings and investment product. Interest on contributions made to the PPF account is guaranteed. On these deposits, you are eligible to deduct up to Rs 1.5 lakh under Section 80C during a fiscal year.

ULIP (Unit linked insurance plan)

Long-term investment products called ULIPs give you the option to invest in debt, equity, or both types of funds. With ULIPs, you have the freedom to move between funds in accordance with your financial objectives. Under the Income Tax Act of 1961, sections 80C and 10(10D), you can reduce your taxes by investing in ULIPs.

National Savings Certificate

A savings bond programme called National Savings Certificates encourages investors, mostly those with modest to moderate incomes, to make investments while deducting income tax under Section 80C. As long as you have access to internet banking, you can purchase NSC certificates in electronic form if you have a savings account with a bank or post office. An investor may purchase NSCs for themselves, on behalf of a minor, or as a joint account with another adult.

Senior Citizen Savings scheme

The Senior Citizen Savings Scheme (SCSS) is a government-backed savings option available to people over 60 that provides a reliable stream of income during their post-retirement years while also yielding relatively high returns. Under Section 80C of the Income Tax Act, 1961, the principal amount deposited in a SCSS account is tax deductible up to a maximum of Rs. 1.5 Lakh. Nevertheless, this exemption is limited to the current tax structure. If someone wants to file tax returns using the new framework that was unveiled in the Union Budget 2020, they are not permitted to do so. However, the interest received is taxable according to the taxpayer's applicable tax slab.

Life insurance

A vital component of a person's financial portfolio, life insurance provides security for the policyholder's family in the event of an emergency. For the sake of the family's security, this means that the primary breadwinner's duty is to obtain life insurance as soon as possible. Policyholders who purchase life insurance, whether traditional (endowment) or market-linked (ULIP), can benefit from tax advantages on their premium payments.

Pension plans

An additional type of life insurance is a pension plan. Unlike other insurance plans, such as endowment and term plans, which are referred to as protection plans, they have a different goal in mind. Pension plans are designed to support the individual and his family should he survive, whereas protection plans are designed to provide financial security for the individual's family in the event of his death. The Income Tax Act's Section 80CCC (sub-section under Section 80C) governs pension contributions. The total amount of deduction allowed under all of Section 80C's subsections cannot exceed Rs 1.5 lakhs. Upon maturity, one-third of the total pension amount is tax-free, while the remaining two-thirds are considered income and subject to marginal tax rates. Following the beneficiary's death, the amount is tax-free.

Health insurance or Mediclaim

The costs associated with an accident or hospital stay are covered by health insurance, or Mediclaim as it is more commonly called. Pre- and post-hospitalization costs are also covered by Mediclaim, subject to the sum assured.

Under Section 80D, health insurance provides tax benefits. Tax benefits are available on insurance premiums up to Rs 20,000 for senior citizens and Rs 15,000 for everyone else. The policyholder is eligible to receive a tax benefit of Rs 35,000 (Rs 15,000 + 20,000) if he pays Rs 15,000 as premiums on his own policy and Rs 20,000 for his senior parent. The amount received under critical illness insurance policies has a tax-free maturity value.

NPS

PFRDA, the Pension Funds Regulatory and Development Authority, oversees the NPS, or New Pension Scheme. Any Indian citizen who is between the ages of 18 and 60 is eligible to take part. Due to the low fund management fees, it is very economical. The fund managers oversee the assets in three different accounts: G Government securities (G), Corporate bonds (C), and Equity (E). Each account has a different asset profile. A portfolio can be actively managed by investors (active choice) or passively managed by them (auto choice). Section 80CCD of the Income Tax Act applies to contributions made to the NPS. Together with Sections 80C and 80CCC, the total allowable deduction under this section cannot exceed Rs 1.5 lakhs.

Tax-saving mutual funds

Tax advantages are available for investments made in tax-saving mutual funds, commonly referred to as equity-linked savings schemes (ELSS). Among other assets, tax-saving mutual funds invest in stock markets and are better suited for investors who have a medium to high tolerance for risk. Three years is the lock-in period for investments. Under Section 80C of the Income Tax Act, investments made in tax-saving mutual funds are protected up to a total of Rs 1.5 lakhs. Under Section 10(D), proceeds upon death or maturity are free from taxes.

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