Updates on Rajkot NewsInsurance and Pf FdTax Deductions Tax DeductionsIn 2022, learn about the math of tax relief: With the start of the Income Tax Return (ITR) filing season, the salaried class should start thinking about ways to save money on taxes. Along with depositing money into a salary account, some particular investing considerations are made, which not only saves taxes but also helps to build a decent retirement fund. Let us look at five such tax-saving choices where you may build a retirement fund while also saving money on taxes.
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PPF and LIC premiums are tax-deductible.
Saving on taxes is an excellent way to save on PPF (Public Provident Fund).Along with the maturity amount and interest, this investment is tax-free. This is a better strategy to build huge wealth and a safe investment in the long run. A tax deduction is granted on investments in a PPF account under section 80C. If you have a LIC policy, on the other hand, you can claim a tax deduction on the premium. Tax relief of up to Rs 1.50 lakh is available under section 80C.
EPF Exemption from Tax
The Employees’ Provident Fund (EPF) is one of the simplest ways for salaried people to save money on taxes. Tax relief is also attainable under section 80C in this case. The Central Board of Trustees oversees the EPF. It’s worth noting that interest earned in a PF account is tax-free up to Rs 2.5 lakh each year. This is a better way to save for retirement.
ELSS is tax-exempt.
If you invest in a mutual fund’s equity linked savings scheme (ELSS), you will be eligible for a tax deduction under Section 80C. With better returns on ELSS, there is a tax benefit. This is why, because of the double advantage, ELSS is a better tax-saving alternative for salaried individuals.
FDs with tax savings are exempt from paying taxes.
For salary earners, a tax-saving fixed deposit is also a viable choice. This is a type of FD in which you can save up to Rs 1.5 lakh in taxes. It has a 5-year lock-in duration. For the salaried class, this is a safe tax-saving alternative. It’s important to note that the return on a tax-saving FD is taxable.
The NPS is exempt from paying taxes.
A tax exemption is available under section 80CCE for the National Pension Scheme (NPS) up to a limit of 1.5 lakhs. Aside from that, under section 80 CCD, you get an extra exemption of Rs 50,000 in NPS (1B). For the salaried class, NPS is a good long-term tax-saving solution. It is also a superior retirement plan.
PF, FD, and Insurance Tax Savings Tax Relief: In 2022, learn about the math of tax relief.
2022 Tax Savings Guide: The tax-saving FD is comparable to a regular FD, but it has a 5-year lock-in term. You can claim a maximum tax deduction of Rs 1.5 lakh for investing in a tax-saving FD.
ELSS funds, often known as tax-advantaged mutual funds, are one of the best tax-advantaged investment options. This fund is meant to save you money on taxes while also increasing your investment return. By investing in ELSS funds, you can save up to Rs 46,800 in taxes. Remember that long-term ELSS funds outperform regular funds like FDs, PPFs, and NPSs. A three-year lock-in term is included with the fund. Here’s some information on the different ways you might save money.
Fixed deposits that save you money on taxes
The tax-saving FD is comparable to a regular FD, but it has a 5-year lock-in term. Anyone can invest in a tax-deferred FD, but the interest earned from such an investment is taxable. Banks’ FD interest rates typically range from 5.5 percent to 7.75 percent.
PPF is a good investment.
The PPF is a government-backed long-term investment. Under section 80C, the amount placed in a PPF account is tax deductible. Thus, any Indian citizen can open this account, but a HUF cannot open a PPF account. It has a 15-year lock-in period that can be extended for an additional five years. After 7 years, you can make partial withdrawals from this account. The government currently offers a 7.1-percent interest rate on PPFs. You must pay a minimum of 500 rupees and a maximum of 1.5 lakh rupees. The interest on a PPF account is tax-free.
Invest in a Provident Fund for Employees
An EPF is a retirement savings plan for salaried employees. The employer withholds 12% of the basic income, plus an inflation allowance. The account is kept with the provident money. If an employee’s basic income is more than Rs 15,000 per month, he or she must open an EPF account. This fiscal year, the government is offering a 7.5 percent interest rate on EPF accounts.If you retire after five years of employment, you can withdraw your whole PF amount (including interest) tax-free.
Investing in the National Pension Scheme (NPS) is a good idea.
The government of India established the National Pension Scheme. The goal of which is to provide unorganised sector workers and working professionals with a pension after they retire. Under section 80C, you can get a tax deduction of up to Rs 1.5 lakh by investing in NPS. Under Section 80C D, an extra deduction of Rs. 50,000 can be claimed for NPS investments (1B). The NPS is open to everyone between the ages of 18 and 65. After 15 years, the NPS can be partially discontinued. However, it is dependent on the circumstances.
The maximum contribution amount in this scheme is unlimited.NPS returns could range between 12 and 14 percent.It’s worth noting that, under section 80CCD, the employer’s contribution to the employee’s NPS account is not taxed up to 10% of the employee’s base pay and dearness allowance (14 percent in the case of Central Government employees) (2).
Invest in a Unit-Linked Insurance Plan (Unit-Linked Insurance Plan).
A Unit-Linked Insurance Plan, or ULIP, is a financial product that combines investment with insurance. A portion of the ULIP investment is used for insurance, while the rest is put into the stock market. You can earn up to Rs. 50,000 under Section 80C of the Income Tax Act. A tax deduction of up to Rs 1.5 lakh is available. The investor can deduct the cost of a ULIP for himself, his spouse, or his child.
The ULIP’s returns fluctuate since they are connected to the stock market. It could be anywhere between 12 and 14 percent.Invested, withdrawn, and matured funds are all tax-free.The maturity amount will be taxable if the total yearly premium in all ULIP schemes exceeds Rs 2.5 lakh during the financial year.
Sukanya Samrudhi Yojana (Sukanya Samrudhi Yojana) is a government project.
Sukanya Samrudhi Yojana is the government of India’s most popular scheme for the development of girls in the country. For a period of up to ten years, parents can open an account in their child’s name. When you attain the age of 18, you can withdraw up to 50% of your deposit. The plan has an annual interest rate of 8.5 percent.The highest amount of money that can be invested in a single financial year is Rs 1.5 lakh. This programme is tax-free in terms of investment, withdrawals, and maturity.
Under section 80C, such contributions may result in tax savings.
Other ways to save money on taxes:
Tuition fees for children can help you save money on taxes.
Tuition fees paid for the education of two children are eligible for a deduction of up to Rs 1.5 lakh under section 80C. This fee should only be paid if you are enrolled in a full-time programme. By paying a fee to any school, college, university, or educational institution in the country, you can get this benefit.
Payment of a life insurance premium can help you save money on taxes.
The annual premium paid for LIC in the taxpayer’s name or in the name of the taxpayer’s wife and children is eligible for a tax credit under Section 80C. Deductions are permitted only if the premium is less than 10% of the insured amount.
Repayment of a home loan can help you save money on taxes.
The principle of a loan received to buy or build a residential property is eligible for a deduction under section 80C. Stamp duty, registration fees, and transfer charges are all subject to this deduction.
Interest on a student loan
Interest on loans taken for higher education can be claimed as a tax deduction. There is no limit to the amount of such a deduction that can be claimed on an income tax return. However, you can claim deductions for up to eight years, beginning with the first year.
Premiums for medical insurance and medical expenses
Tax breaks: You can deduct the cost of health insurance premiums and the Central Government Health Scheme paid during the year for yourself, your spouse, and your children.Section 80D of the Income Tax Act allows you to claim up to Rs 25,000 in deductions. You can claim a deduction of up to Rs. 50,000 if you are a senior citizen.
Savings on taxes: If a taxpayer does not pay a health insurance premium, he or she can claim a deduction for medical expenses incurred during the year under section 80D, but only if certain circumstances are met. If such expenses are incurred for the parents, however, an extra deduction of Rs. 25,000 can be claimed. Similarly, if money is spent on parents, a senior citizen can claim an extra deduction of up to Rs 50,000.
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