The end of the financial year in India, which typically falls on March 31st, marks an important deadline for taxpayers to optimize their tax-saving investments. Making informed decisions regarding these investments is crucial, especially for individuals who follow the old tax regime. Rather than haphazardly allocating funds to any available tax-saving option, a strategic approach is recommended to maximize benefits.
Here’s a breakdown of the strategic approach recommended by experts:
1. Assess Existing Section 80C Investments:
– Evaluate current investments such as insurance premiums, EPF contributions, etc., and deduct these from the ₹1.5 lakh limit allowed under Section 80C. This helps in determining the remaining eligible amount for further investments.
2. Popular Section 80C Options:
– Consider traditional tax-saving investment options like LIC policies, Public Provident Fund (PPF), Fixed Deposits (FDs), and Tax Saver Mutual Funds. These investments offer tax benefits under Section 80C of the Income Tax Act.
3. National Pension System (NPS):
– Contributions to NPS are eligible for tax deductions under Section 80CCD(1B), which is over and above the limit of Section 80C. Taxpayers can claim an additional deduction of up to ₹50,000 under this section.
4. Health Insurance:
– Premiums paid towards health insurance policies for self, spouse, children, and parents qualify for tax deductions under Section 80D. Different limits apply based on the age of the insured individuals.
5. Interest Paid on Home Loan:
– Interest paid on a home loan is eligible for deduction under Section 24, up to ₹2 lakh. Additionally, Section 80EE allows for a deduction of up to ₹50,000 on home loan interest, over and above the limit of Section 24.
6. Principal Portion of Home Loan:
– The principal portion of a home loan can be claimed as a deduction under Section 80C, up to ₹1.5 lakh. Furthermore, the interest portion can be claimed as a deduction from income from house property.
By strategically leveraging these tax-saving options, individuals can optimize their tax-saving investments before the deadline. However, it’s advisable to consult with a tax expert to receive personalized advice tailored to individual financial goals and circumstances.
Please note that the views and recommendations provided by individual analysts in the article represent their opinions, and it’s essential for investors to verify information and seek professional advice before making any investment decisions.
In summary, the strategic approach involves evaluating existing investments, considering various tax-saving options available under different sections of the Income Tax Act, and seeking expert advice to make informed decisions aligned with one’s financial objectives.