Every time we step into a new fiscal, it becomes imperative to plan our finances in the right manner. The changes made in every year’s Union Budget needs to be reflected in your financial planning for availing the most out of deductions and exemptions. Today we are going to take a look at some expert-recommended tax planning tips which can be of considerable help in lowering the burden of tax.
- You can avail benefit up to 1.5 lakh INR per annum u/s 80C by investing in Equity-Linked Saving Schemes whose ultimate return can be opted either through dividend or growth option.
- Gains arising out of selling a long-term asset such as equity-linked mutual funds or equity shares were earlier exempt from tax u/s 10(38). However, the current budget has made all long-term capital gains taxable. In spite of this, capital gain made up to 31st January 2018 has been kept away from the purview of taxation. Thus, for example, if you had bought shares worth 100 INR in 2017 whose stock value was 110 INR on January 2018 and sold it at the price of 120 INR in July 2018, then you will be taxed on the capital gains of just 10 INR.
- PPF accounts have been introduced by the government to propel us towards tax savings u/s 80C. Return arising out of the same have been kept complete tax free while PPF interest rate has been kept subject to quarterly alterations. The best thing about Public Provident Fund account is that it can be availed by all individuals from an authorized bank or post office branch. It thus serves as the perfect pick for investors who wish to keep a low risk profile by keeping volatile funds away from their portfolio.
- Our government is understanding the growing demand and importance of higher education and that’s why interest paid on higher educational loans taken for self, spouse or children has been kept completely tax free u/s 80E. With no upper ceiling on the amount of interest paid, you can avail this section to your advantage for both decreasing your tax burden and catering to education financing.
- Tax deductions can be claimed out of donating to charity or philanthropic commitments. This comprises of contributions made towards National Relief Funds which can be claimed as a deduction u/s 80G. While certain donations qualify for 100% deduction, others get only till 50% based on the purpose of donation. It is also imperative to note here that donations made only via cheque and cash can qualify for such deductions.
- Home owners in India can benefit out of massive savings in tax by availing home loans. A deduction is allowed u/s 80C on the principal amount which is repaid in the current fiscal up to the maximum limit of 150000 INR. You can also claim deduction u/s 24 up to 200000 INR on the interest paid on home loan. Last but not the least, a benefit up to 50000 INR can also be availed u/s 80EE by first time home buyers. A second home loan can also be taken if you are residing in the residence on which the first home loan was taken. No upper limit is there on the second home loan.
- The hybrid Unit linked insurance plan presents with the unique combination of savings and protection into various market-linked assets which can be of great assistance in meeting your long-term goals. The 5 to 9 fund options in most of the ULIPs come with a lock-in period of 5-9 years wherein the fund value on redemption or after the passage of 5 years is kept tax-free.
As an investor, it is advisable to look out for options which can serve the dual functionalities of saving tax as well as generating tax-free income.