Making the most of your tax benefits – 80C, 80D and more

— FY 2018-2019 —
Dear Tax Payer,
Read till the end to make the most of your 80C, 80D and other tax benefits
One can save a few thousands by claiming the full benefit of the section 80C or 80D benefits available under the Income-tax Act. Also, Investing Rs.1.50 lakh (80C) brings discipline in your savings and helps builds a good corpus over time. Here’s how one can make the most of 80C and 80D Benefit available.
You can invest in an equity-linked savings scheme (ELSS) or a unit-linked insurance plan (Ulip), If you prefer aggressive investments and willing to take higher risk. An ELSS invests at least 65% of its funds in equity. Lock-in period is 3 years. Deduction is also allowed on premium paid for a Ulip. But, do remember, buying a Ulip involves investing regularly over a few years.
If you prefer steady returns and safe investment, invest in instruments like Public Provident Fund (PPF), National Savings Certificate (NSC) or Sukanya Samridhi Yojana. With these instruments, you need to stay invested for a longer term. NSCs can be bought from the post office. PPF and Sukanya Samridhi accounts can be opened with some banks.
For salaried people, EPF contribution is an option to claim deduction under section 80C. Your employer deducts 12% of your basic salary to put in Employees’ Provident Fund (EPF). For a basic of Rs.25,000 per month, an amount of Rs.36,000 (Rs.3,000 x 12) is contributed to EPF by you annually.
A lot of expenses are also allowed to be deducted under section 80C. So, don’t worry if you don’t have sufficient funds to make the above investments. Life insurance premium payments, school fees (Tuition fees only) of children, principal repayments on home loan, stamp duty and registration charges paid on purchase of a house property, can all be claimed.
Many tax filers do not claim deduction under section 80D. While you may still enjoy the benefits of a corporate health cover, consider purchasing medical insurance for your family, including parents. A wider range of ailments and situations can be covered and at the same time you can claim deduction under section 80D. This year, there has been an enhancement in the deduction allowed.
Those who wants to save for pension, could consider the National Pension System (NPS). If your employer does not offer NPS, you can open an account yourself. Deposits of up to Rs.50,000 can be claimed under section 80CCD(1B) in addition to Rs.1,50,000 claimed under 80C. Pension funds when committed to over a long term (around 20 years) can also offer higher returns than the traditional products.
Many, who incur short-term losses in equity markets do not include losses while filing their tax return. Not all losses are bad; short-term capital losses can help you save tax. Short-term loss from equity shares can be adjusted against short-term and long-term capital gains. If these are not set off fully in the year they are incurred, they can be carried forward. These can be set off against capital gains income in future.
If you have not planned your investments yet and can’t make a lump sum investment right away, don’t worry; you have time until 31st March. You can plan your investments over the next two months, as section 80C deductions can be claimed directly in your tax returns. For the higher rate of tax deducted at source (TDS) applied by your employer for not providing for tax deduction investments till now, you can claim a refund while filing your tax return.
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