4 Tips To Save Tax From Your Income This Year

While you work hard for the daily sustenance of you and your family, it is essential to plan for the different phases in life. Though your earnings may suffice your working years, saving some extra money will enable you to secure your family’s dreams financially. It is imperative that you have a diverse financial portfolio. You must look for tax saving investment options while making investments.

There are financial instruments like savings plans, wealth creation plans, and government-sponsored schemes such as NPS (National Pension System), which are excellent tax saving options as well. Furthermore, investing in these instruments can also help maximize your savings when you file an income tax return. There are some ways which will help you understand the method of ensuring tax benefits if followed consistently.

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1. Start Planning Early Into The Year

When you invest in tax saving options early into the financial year, you can work towards reaping long-term benefits from the plan. You can create your financial resources accordingly to meet your future expectations from the investments. If you opt for tax saving investment options, it is crucial to start your monetary planning timely. Your tax-saving strategies have a significant impact on the required results. Therefore, you must utilize the advantage of the time to avoid the last-minute tax-hassles.

When you start planning early in the year, you get to choose from a variety of options available for investing your money. Further, you can devise the tax-saving vehicle to build your financial corpus. Financial instruments like systematic investment plan help reap benefits with nominal or regular amounts, which can be set aside for investments.

2. Maximize Savings Under 80C

It is crucial before exploring tax saving investment options to consider the factors of liquidity and returns. As discussed earlier, investing in the first quarter will provide you with leverage, which will get consolidated later. You will be able to get maximum returns on investments from different tax saving options.

Public Provident Fund (PPF), National Savings Certificate (NSC), Equity Linked Saving Schemes (ELSS) are some tax-saving financial avenues. You, as an investor, are eligible for tax exemption of up to 1.5 lakh according to the Section 80C of Income Tax Act. The savings from these can sum up to a considerable amount.

3. Fully Utilize Tax Deductions Under 80D

You cannot predict the future. Any unforeseen circumstance can take place and hamper your life. You can prepare for such events by purchasing health insurance. On the one hand, your medical expenses are covered in case of emergencies, and on the other hand, you will get tax benefits.

You will be entitled to claim a deduction of Rs 25,000 every financial year. This advantage can be availed under Section 80D of the Income Tax Act. The amount is deducted from the total premium paid for health insurance. The benefit for senior citizens amounts up to around Rs 50,000 per fiscal year. It also provides you with tax reductions up to Rs 5,000 on pre-emptive medical check-ups. Therefore, investments should be made, keeping in mind the tax-saving options.

4. Look For Available Equity Linked Saving Scheme Options

ELSS is considered fruitful out of the many tax saving options. This investment avenue qualifies for tax exemption under Section 80C. It is an equity-based mutual fund that focuses on investments in stocks. ELSS also provides a short lock-in period of three years. You can invest in ELSS through a systematic investment plan (SIP) or a lump sum amount of money.

You can either invest monthly or commit a large chunk in one go later. It can generate inflation-adjusted returns in the long run. If you have a higher risk-taking capability, it is advisable to invest in ELSS. You can also minimize your tax liability. You must calculate the risks and make the decisions suiting your financial planning.

5. Ensure Saving With Tax Benefits

The increasing expenses are another factor due to which it is a sensible option to save for the years to come. To minimize your tax liability as per the income tax slab 2020-21, it is crucial that you work towards building an ideal tax-saving investment strategy.

When you have an extensive financial planning portfolio, you must ensure that you save from the available tax benefits. You will be able to secure your family’s future if you plan your finances every year in this manner. Various savings and wealth creation plans, from reputable insurance companies like Max Life Insurance, help you avail of tax benefits while serving as the best tax saving options to suit your long-term financial planning needs.

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