How do I save tax legally? This by far, is the most asked question to any financial advisor. Every salaried individual wants to make sure that their income tax payments are reduced as much as possible. Well what better way to do so than to invest in the tax saving instruments under section 80C. Under section 80C, a deduction of Rs. 1,50,000 can be availed from your total income. In simple terms, you can reduce up to Rs. 1,50,000 from your total taxable income through section 80C.
Now let’s take a look at the most popular tax saving investment options.
PPF (Public Provident Fund)
It is one of the traditional yet highly preferred retirement planning investments. It is also a great long-term tax saving investment. The maximum amount that is allowed as an investment in the scheme is Rs 1.5 lakh in a financial year. Interest income on PPF and the amount received on maturity are both tax free.
ULIP (Unit Linked Insurance Plan)
ULIP is a unique combination of investment and insurance that results in a tax saving of Rs 1.5 lakh per year. The premium paid by you is split between insurance and investment. The corpus received at maturity is exempt from tax. You can visit the Kotak Life Insurance website for more details on the same.
Life Insurance
Life insurance is one of the most popular tax saving investments under Section 80C of the Income Tax Act. With a maximum deduction of Rs 1.5 lakh allowed in a given financial year, it is one of the most opted tax saving tools by individuals. The amount received at maturity or in case of death is tax free (subject to certain conditions). Apart from the tax saving benefits, life insurance helps one plan for the unforeseen events in his or her life. You can know about the various Life Insurance products & life insurance companies on insurance sites like Kotak Life Insurance, HDFC Life, ICICI Prudential Life Insurance etc.
ELSS (Equity Linked Saving Scheme)
ELSS is an equity mutual fund that comes within the ambit of tax saving investments. With a lock in period of 3 years, this investment option offers an exemption of maximum Rs. 1.5 lakh in a financial year. The investment returns depend on the performance of this scheme in a given year and the redemption proceeds from the investment are tax free.
This was about the tax saving investment options. Now let’s understand what you mean by Income Tax Return (ITR). An income tax return is the tax form or forms used to file income tax with the Income Tax Department. The tax returns usually in a pre-defined worksheet format where the income figures used to calculate the tax liability are written into the documents themselves. The tax system in India states that tax returns must be filed every year for an individual or business that received income during the year, whether through regular salary income, interest, dividends, capital gains or other sources.
Tax returns, regardless of whether it relates to an individual or a business, must be filed by a specific date.
If the return shows excess tax has been paid during a given year, the assesse is eligible for a ‘tax refund’, subject to the department’s interpretations and calculations.