Tax Planning And Saving Options

Tax Planning And Saving Options

Individual should do tax planning. It helps to maximize their income by saving on taxes. Maximizing the return and making investments with the objective of minimizing the tax liability involves in tax planning.

The amount pay for tax is according to the source of income viz. income from salary, income from house property, income from dividends, income from business, interest income, etc. and the amount and type of investment made. Tax for the income getting from different sources also varies. There are deductions from aggregate income, provisions exemption of certain incomes and from the tax computed on total income.

                                                                    Tax Saving options

Special Bank Term Deposit Scheme (BTDS) : According to the Section 80C of the Income Tax Act the investment under this BTDS is eligible for relief.

Post Office Time Deposit Scheme : This type of investment is also eligible for relief under Section 80C of the Income Tax Act.

Public Provident Fund :  Section 80C allows relief for the deposit in PPF accounts. The interest earned on deposits in PPF accounts is fully exempt from income tax. The principal and interest in a PPF account can’t be attached by a court decree.

Life Insurance: Under Section 80C of the income tax act the premium paid by a Hindu undivided family for life insurance or paid by an individual for life insurance of self or spouse or any child of such individual is eligible for deduction.  Available maximum deduction is up to a maximum of Rs. 100,000/- under section 80C along with other investments under section 80C, 80CCC and 80CCD. The sum received under a life insurance policy is totally tax free.

National Saving Certificates NSCs :  Under Section 80C the investment in NSCs is also eligible for relief. The interest accrued on NSCs, though taxable, is treated as investment for the purpose of section 80C.

Post Office Senior Citizen Scheme : Under section 80C the investment under this scheme is also eligible for relief.

Mutual Fund : Section 80C also allows deduction for the investment in Equity Linked Tax Saving Mutual Funds. The lock in period for these funds are usually three years.

House property : The repayment of housing loan up to Rs. 1,00,000/- qualifies for relief under section 80C of the Income Tax Act. A further rebate in the form of deduction on accrued interest up to Rs. 1,50,000/- per annum from the total income is available under section 24 of the income tax act.

Health Insurance : Under Section 80D the investment in health/medical insurance of self or family members is exempted up to Rs. 20,000/- for senior citizens and up to Rs. 15,000/- for others. For medical/health insurance for parents an additional relief is available up to Rs. 15,000/. If they are senior citizen then up to Rs.- 20,000/-  is available.

Educational Loans : Under section 80E of the Income tax act deduction is available for any amount paid in the previous year by an assessee out of his income chargeable to tax, by way of interest on loan by him from any financial institution or any approved charitable institution for the purpose of pursing his higher education or for the purpose of higher education of his spouse and children deduction is available.


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