Bank Deposit Schemes, Banking

15 Tricks to save Income Tax

Posted By: Admin
August 31, 2022 |

Invest in Future Planning, Portfolio Management to save income Tax, Tips and Tricks to get maximum tax rebate

Tricks to save Tax: The Indian Finance Ministry has given a wide range of options by which an individual can save tax charged on income. You can do investment in various sections under the income tax Act 1961 to save income tax. I have covered most of the options which are very common and easy to understand. By investing money in these options one can save a maximum amount of Income Tax. Now without discussing much let’s see 15 Tricks to save your Income Tax, which are as under –

1. Fixed Deposit –

To save tax, this is the most used and easy option. Almost all the commercial banks are providing this option. One can open a Tax Saver Fixed deposit amount. One can open a Tax Saver Fixed deposit with a lock in Period of 5 years. Fixed deposit accounts provide the investor fixed interest rate. One cannot break the deposit and can not avail loan against the FD until it matures. Know more about Fixed deposit schemes and benefits and compare with other deposit schemes, click here.

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2. ULIP –

Another most popular way to save tax is to start investing in ULIP. Unit linked Investment Program is a full form of ULIP. ULIP never provides a fixed rate of return. Professionals having vast knowledge of this domain manage ULIPs as it is linked to the share market. ULIPs have even returned 25-30% of return in previous years. The Plans are lucrative and attract youth specially who are willing to take risk for higher return. There is no lock in period in ULIPs.

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3. Public Provident Fund –

Many investment advisors suggest PPF schemes to their customers . Presently PPF is providing 7.10% p.a. rate of return which is highest among all fixed return options. The Finance ministry regularizes investment made in this scheme. The Finance minister of the Indian government from time to time announces the rate of return. There is a lock-in period of 15 years in this scheme. However, investors can withdraw partially each year after completing 7 years of investment. To know in detail by clicking here.

4. Mutual Funds –

The most marketed and most lucrative option to save tax is mutual funds. There is a flood of mutual funds in the market. The mutual fund investments are subject to market risk. SIP (Systematically Investment Plan) is the way to Invest in Mutual Funds. Mutual Funds also yield a high rate of return and have been the primary choice of youth.

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5. Insurance Schemes –

As we are aware of various Insurance Schemes like health Insurance, vehicle Insurance, Life Insurance and many more. Insurance Schemes are nowadays designed to serve the purpose of tax saving. The investment can be done in various Insurance schemes which are providing solutions to tax problems. The investment as well as return both are tax free in some insurance schemes. People find investing in insurance good, as it serves both purpose at a time, which are coverage of life risk and benefit of tax saving.

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6. Sukanya Samriddhi Yojana –

The scheme is mainly focused on saving money to cater future demands of expenditure related to a girl child. One can open Sukanya Samriddhi Yojana accounts in banks and post offices in India. This scheme gives 7.9% p.a. return on investments. There is lock in period till the girl attains age of 21. However, the investment is to be done till the age of 14 of the girl in whose name the account is opened. The investor can partially withdraw money in case of urgency and emergency but on certain conditions. You can read my article on Sukanya Samriddhi Yojana to know in detail by clicking here. Use this as a trick to save tax.

7. National Saving Certificate –

This scheme is launched by the government of India, to inculcate the habit of saving. The scheme can be utilized with post offices in India. The scheme gives you a return of 5.9% p.a. compounding. There is a lock in period of 5 years in this scheme. The investor can avail loan facility against the accumulated fund at lower rate in comparison to other lending options. The scheme is widely popular in rural areas and senior citizens.

8. Senior Citizen Saving Scheme –

The Government of India has designed this scheme to serve the taxation purpose of senior citizens as the name resembles. The scheme is giving a rate of interest of 7.4% which can be credited to the account monthly also. The amount is invested for 5 years. However, investors can withdraw the amount before maturity. The maximum amount of Rs. 15.00 Lakhs can be deposited in this scheme. The scheme is available with banks and post offices in India. The specialty of this scheme is that an investor can have multiple accounts under this scheme.

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9. Home loan Principal payment –

Many taxpayers are aware of this option. If one has availed a housing loan to purchase a dream house, the borrower can have the benefit of saving income tax on the repayment of principal amount under section 80C of income tax act. Also, the interest paid can be claimed for tax relief under section 24B. One can get tax relief on purchase of a second house also. There is a cap of Rs. 2.00 Lakhs per annum to claim under this section. Use this as tricks to save tax.

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10. Tuition fee for 2 children –

This option is not very common among taxpayers. As the benefits are available only if you have children and they are studying. The tuition paid to the institution of the children can be claimed under Section 80 C of Income Tax Act. The maximum number of children for whom the tuition fee can be claimed is 2. The children should be of one individual and one of any parents can claim the deduction. Legal guardians also are eligible to claim deduction under this option. You can use this as a trick to save tax.

11. ELSS –

Equity Linked Saving scheme, is a better option for people who have capacity of taking market risk. The investments are fetching a high rate of return annually. However, the pandemic has reduced the performance of many schemes. ELSS is basically a mutual fund scheme which has a lock-in period of 3 years. The investment is a diversified pool of stocks.

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12. NPS –

The National Pension Scheme is basically a retirement planning scheme. An individual between the age of 18 to 60 years can invest in this scheme. The scheme offers two types of accounts, one is Tier -1 and another is Tier-II. One cannot withdraw entire money from a Tier-I account. Even after retirement there are some restrictions on withdrawal of money. Whereas money from Tier-II accounts can be withdrawn. The fund is managed by fund managers selected by PFRDA (Pension Fund Regulatory and development authority). The rate of return ranges between 9-12% p.a. One can invest up to the age of 65 years in this scheme.

13. Stamp duty and registration cost of house –

Yes, you can claim stamp duty paid while registration of house and registration cost paid over and above the stamp duty while registering in the house in your name. Individuals and HUFs both can avail this benefit. The benefit can be claimed only in the same financial year in which the property is purchased. The property should be in your name till 5 years otherwise the claimed deduction will be counted as your income. The registration charges generally are 1% of the total registration amount. The property should belong to the assess. Use this as a trick to save tax.

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14. NHB deposit Schemes –

NHB Suvriddhi Term deposit scheme which is less popular than other investment options. It is basically a term deposit scheme in which individuals and HUFs can invest money. Like other schemes this also has a lock in period of 5 years. The minimum amount of Rs. 10,000/- can be invested in this scheme.

15. Atal Pension Yojana –

Rarely do people know about this. Atal pension Yojana is a scheme which is designed to provide pension to all individuals who do not plan their retirement. The scheme can be availed from banks and post offices in India. The investor has to pay monthly instalments to avail this scheme. The investment made is eligible to claim deduction under income tax act.

To conclude, the investment ideas discussed in the above article are easily available with banks and post offices. Some of the options can be availed through net banking and mobile banking. You can plan your investment and get the benefit of tax deduction.

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