What are some ways to save Income tax in India?
Hie Rohith, There are some ways in which you can claim deductions in following sections and you can save tax in India :- **Incidental actions that bring tax benefits** Here you get benefits for certain positive actions you take in your financial life. Here again all you need to do is to submit proofs to claim tax benefits for those actions. Interest payment on your home loan- this qualifies under section 24 Principal re-payment on your home loan- this qualifies under section 80C tax rebate Insurance premium receipts paid for the year- this qualifies for section 80C tax rebate Tuition fee receipt paid for your children if any- this qualifies for section 80C tax rebate Your side contribution to employee provident fund (no proof to be submitted as the HR already has the records) – this qualifies for section 80C tax rebate Mediclaim premium receipt- this qualifies for section 80D tax rebate Parents' mediclaim premium receipt- this qualifies for section 80D tax rebate Education loan statement (mentioning the interest component)- this qualifies for section 80E tax rebate **Investing/saving for tax benefits** Here is where you need to plan and act for managing your tax outgo. Broadly here you deal with the provisions of Sec 80C/Sec 80 CCC, 80G and 80 CCG. You are primarily expected to invest in any of the products listed in these sections and in return you get the benefit of paying lesser tax. But there is an upper limit to this. For both section 80C and section 80CCC the upper limit collectively is Rs 1,00,000. Section 80C/80CCC: In case the total amount claimed under 80C from the items that are listed in the above incidental category is totaling to Rs 1,00,000 then just chill. You have nothing much to do under these sections. But if total is less than Rs 1,00,000 then you can make some investments to claim tax benefits. The products that qualify for the same are as follows: Public provident fund Bank fixed deposits (the 5 yr thing) Mutual fund-ELSS ULIPs National Savings Certificate (NSC) Pension Plan Naturally your next question will be which product to choose. Here is our recommendation: On closely looking at these products you will notice that all of them are long-term in nature. As it is a long-term investment, we need to take into consideration the negative impact of inflation while deciding on the product. Inflation robs the value of money as time passes. What a Rs 500 note can buy today it cannot buy after say, 5 years. Probably you need to have a Rs 1000 note! Hence whenever you make investments that are long-term in nature, the returns you earn necessarily should beat inflation. Only growth assets have the power to beat inflation in the long run. Equities, equity mutual funds, gold and real estate have the power to beat inflation in the long run. Though they are riskier in nature, in the long run they deliver the best value. Income assets like fixed deposits, bonds, traditional investment-cum insurance policies, etc give returns less than inflation. Arranging the section 80C products as per the asset class: Income assets Public provident fund Bank fixed deposits National Savings Certificate (NSC) Growth assets ULIPs Pension Plan **Section 80G** If you donate an amount to any recognized charity or relief fund, a part of the donation can be claimed as a tax rebate. You need to submit the certificate of donation to HR. A few organizations like the Prime Minister's Disaster Fund enjoy 100% deduction - which means the entire donation paid is deductible from your salary. However, most of the other donations including several religious organizations enjoy only a 50% deduction. If you pay Rs. 1,000 to such an organization, you can claim Rs. 500 as benefit. **Section 80CCG** This is the newly announced rebate from the government called Rajiv Gandhi Equity Savings Scheme (RGESS). Features are One can invest a maximum of Rs 50,000 Tax rebate of 50% Only for individuals whose annual income is less than 10 lacs Investing in stocks for the first time Investing in BSE 100, CNX 100, PSUs, certain mutual funds and ETFs (list) Lock in of 3 year but can trade after 1 year There is not much clarity in term of execution and procedure. May be you can give it a miss this year or wait for few more weeks to get complete clarity. Recap- here is the check list of documents you need to submit to your HR In case you live in a rented apartment: 12 months rental receipt from owner In case you have home loan: Statement of housing loan with details of principal and Interest components Medical bills for the year if any Tuition fee receipt paid for your children if any Flight & train tickets for LTA claims Insurance premium receipts paid for the year NSC purchased in the year Mutual fund (ELSS) statement Mediclaim premium receipt Parents' mediclaim premium receipt Education loan statement (mentioning the interest component) Bank Fixed deposit receipts