Tax Saving in India – A beginners guide
This is my first time when i am going to pay Tax, if this is the case then you have come to the right place. This article will cover all the basics of tax savings in India and also here on my blog, you will find other important articles regarding tax saving and on advanced topics.
First thing first, in India you have to pay your taxes once in a year. But if you don’t know how to save tax or very confused over it because of so many different opinion about it from different sources, then just read this article carefully and thank me later.
Tax Rebates under Indian Income Tax Act
- Section 80C
There are various tax saving products available in which investors can invest for returns and at the same time save tax. The government in order to encourage savings and investments among people gives tax benefits for investments made in certain financial products. These financial products are covered in detail under Section 80C of the Income Tax Act.
Under Section 80C investment upto a limit of INR 1,00,000 made in these financial products qualify for deduction from taxable income. In short it means the person is not required to pay income tax on investments upto INR 1,00,000 made in financial products specified under Section 80C of the Income Tax Act. So a person falling in the highest tax bracket of 30% can save upto INR 30,000 in tax by utilizing the entire limit of Section 80C.
- Deduction under section 80D
Under This section, a deduction up to Rs 10,000 (Rs 15,000 in case of senior citizens) is allowed in respect of premium paid by cheque towards health insurance policy, like “Mediclaim”. Such premium can be paid towards health insurance of spouse, dependent parents as well as dependent children.
- Deduction under section 24(b)
Under this section, Interest on borrowed capital for the purpose of house purchase or construction is deductible from taxable income up to Rs. 1,50,000 with some conditions to be fulfilled.
Financial Products covered under Section 80C: The various financial products covered under Section 80C of the Income Tax Act are as follows:
- Employee Provident Fund (EPF)
- Five Year Bank Fixed Deposits
- Public Provident Fund (PPF)
- Senior Citizen Savings Scheme (SCSS)
- Equity Linked Saving Schemes (ELSS)
- Life Insurance
- Unit Linked Insurance Plans (ULIPs)
- National Savings Certificates (NSC)
- Pension Plans
- Home Loan Principal Repayment
- Tuition fees paid for Children
The list is modified and new products are added to the list and existing products are removed from the list from time to time.
The following table compares the characteristics of various financial products
| Maturity Tax Treatment | Time Horizon | Risk & Returns | Maximum Investment Limit | Liquidity | Inflation Protection | |
| EPF | No, if less than 5 years | Till Retirement | Low | % of basic salary | Low | Low |
| PPF | Yes | 15 Years | Low | Rs 70,000 p.a. | Medium | Low |
| Bank FD | No | 5 Years | Low | No Limit | Low | Low |
| ELSS | Yes | No Limit | High | No Limit | High | Yes |
| Life Insurance | Yes | No Limit | Medium | No Limit | Medium | Low |
| SCSS | No | 5 Years | Low | Rs 15,00,000 | Low | Low |
| ULIP | Yes | 10 to 30 Years | High | No Limit | Medium | High |
| NSC | Yes | 6 Years | Low | No Limit | Medium | Low |
Now if you have any more queries, first i’ll recommend you to read my other articles on Tax savings. And if u still can’t find what you are looking for then you can simply drop a comment here. In comment section you can also discuss about other options and topics which are related to tax savings.
Related posts:
- what is Income Tax Section 80C, 80CCC, 80CCD, 80CCE
- Tax payment on online income
- What are stock exchanges all about ?
- Major Stock Exchanges in world
Filed Under: Tax Saving Articles
About the Author:
Hi, I'm Veer Deora and I write Review10 Blog to help you make the transition from an ametuer to a successful investor (the reader's problem or goal).
I started Review10 to help other deal with the sometimes overwhelming prospect of starting a new investment oppurtinities while still doing your regular job.
I've spent over 5 years in investment and risk handling. To contact me, please email veer.equity@gmail.com (you can add me in your gtalk list for instant assistance) 