Mr Rao falls under the 30 per cent tax slab but has not yet made any tax saving investments to get the benefits of deductions under Section 80C of the Income Tax Act. An investment of Rs 1.5 lakh towards Section 80C can save Mr. Rao up to Rs 45,000 and provide attractive returns on investment. Therefore, it’s high time Mr Rao hurries up to secure his savings before he ends up with a hefty tax liability during his returns filing in July. He must ensure he has made the best possible use of the easy deductions available to him under various sections such as Section 80C, 80CCD, 80D, 80G, etc. Here are some last-minute tax saving tips for him.
One of the best ways to combine wealth creation and tax savings is to buy an ELSS mutual fund. ELSS is diversified equity mutual fund that can be bought as a lump sum or through smaller, monthly contributions. You can buy an ELSS fund directly from any reputed fund house or through online distributors. If you have a KYC-compliant bank account, you can complete the transaction paperlessly from the comfort of your couch. The investment will earn you a deduction under Section 80C.
BUY TERM INSURANCE COVER
A term insurance plan is a great option for any person with financial dependents. Such persons can keep their family financially secure even in death by letting the term insurance replace their income through a substantial sum assured. The premium paid towards a term insurance (just like for any life insurance) can be claimed as a deduction under Section 80C. Remember if you have already taken a life insurance policy, don’t forget to mention your existing life cover details while buying a new policy.
BUY HEALTH INSURANCE POLICY
Unexpected medical costs in your family can dent your finances. It’s best to cover the whole family with a health insurance plan. If you haven’t purchased one yet it’s high time you did. Your premiums paid towards health insurance allow deduction under Section 80D up to Rs 25,000 (or Rs 50,000 non-senior citizens). An extra deduction of Rs 25,000 to Rs 50,000 can be claimed if you buy a health cover for your parents. The insurance premium should be paid in non-cash mode to avail the Section 80D benefit. Ensure that the payment is made before March 31, else you will not receive the tax benefit in this financial year.
INVEST IN NATIONAL PENSION SCHEME
If you are looking to create a retirement corpus for yourself, consider the NPS. It also helps you cut tax. By investing in the NPS up to Rs 50,000, you can earn the deductions available under Section 80CCD. Recently it was proposed to exempt from tax the entire 60 per cent corpus retained by the investor on maturity, while the remaining 40 per cent needs to be reinvested into an annuity purchase.
LIQUIDATE MATURED INVESTMENTS & REINVEST
Without taking out a single rupee from your income in the current year, reinvest your matured investments in tax saving instruments. You need to check your portfolio to determine which of your investments are maturing or can be liquidated without incurring a loss.
DONATE TO ELIGIBLE INSTITUTIONS
If you feel the urge to repay a debt to society or want to donate for a cause, now would be a good time to act. There are relief funds and charitable institutions, donations to whom can get you tax deductions under Section 80G. Depending on the type of institution or fund you are donating to, you can earn either 50 per cent or 100 per cent deduction on the amount donated. Don’t forget to collect your receipt.
You would be advised not to act in a hurry when it comes to any investment or insurance decision. The decision must also be in sync with your financial goals. However, time is of the essence this financial year, and so you should waste no more time in finalising your decisions in order to secure tax savings. If in doubt, consult an investment advisor. Lastly, don’t wait for the last day or week of March to finish these tasks. March 30 and 31 being weekends, it’s best to finish your investments well before March 29.