Growing money by investing the same in appropriate avenues is basically an art. Many among us try hard and learn ways to multiply the hard earned money in a prudent manner. Others seek the help of financial consultants who guide people through their experience and expertise in the finance field. Financial Consultants keep themselves abreast of the latest finance trends that prevail in the market. They guide the general public who seek their help in matters related to investments.
When it comes to investment, saving money through all possible means acts as one of the crucial the basics. Every penny saved helps in increasing the investment levels across varying modes. Anyone who wants to focus in building their money must first target in covering the loop holes through which money drains. One such area is the tax aspect. It is the responsibility of every honest citizen to pay appropriate taxes they need to pay based on the guidance provided by the official Department. However, when it comes to paying tax, the many terminologies and practices involved create a lot of doubts in the minds of general public. Let us look at some such doubts we tend to get pertaining to taxation and practices related to the same.
- What are tax brackets and in which one do I fall for the money I earn per year?
- Are there any ways through which I can pay less tax within the existing legal framework?
- Which are the investment options available that will help me save on the tax I need to pay?
- Given all the available options, what is the maximum amount I can save on taxes?
- What is the main difference between HRA and Home Loan and can I use both at the same time for tax saving purposes?
- Is it compulsory that I go in for Insurance products whether I feel the requirement or not?
- Will availing Home loan and Education Loan benefit in my tax savings efforts in any way?
- Why am I paying higher tax than people receiving more salary than me?
- How do I found out my maximum eligibility for the loans that fetches me savings on tax?
- What is the extent of benefit I get if I avail a Home loan and Education Loan?
- What are the other types of loans that help me avail the tax benefits to the maximum extent possible?
- Tax planning involves the number 80 – 80C, 80CCC, 80D and 80E among many more. What is the efficacy of all these numbers? What do they indicate and are these helpful in tax savings to me in any way?
- Can I claim tax benefit for the Fixed Deposits I have made from time to time?
- Can I avail tax benefits on my investments in PPF and Pension products offered by the many financial institutions in the Finance market?
Tax savings sections
Tax savings can be done under different types of sections. Let us have a detailed look at the many kinds of sections that enable tax savings.
Section 80C encompasses many aspects of Investments and Expenditure. Under Section 80C, people can save on Tax by investing in financial products like PPF, ELSS and Fixed Deposits.
Section 80C encompasses the Investments options through Pension products which are safe avenues for investment
Section 80CCD falls under the Investment category of Tax Savings through which people can save tax by investing in Central Government Employee Pension Scheme.
All the three sections Section 80C, Section 80CCC and Section 80CCD includes Pension products.80 CCD Falls under National Pension Scheme (NPS). People investing in the NPS can avail an exemption of Rs. 50,000/- Over and above 1,50,000.
Tax Savings is offered to people in the Health and well being aspect also through the four sections given below.
All Medical Insurance products fall under this category. When people cover their Family and Parents by procuring Medical Insurance they can avail a maximum of Rs. 60,000/- tax benefit under Section 80D.
All medical expenditures pertaining to disabled dependents and their maintenance falls under Section 80DD. A maximum deduction of Rs. 1.25 Lakhs can be claimed as Tax benefit under this section.
Section 80DDB that falls under the health and well being aspects of Medical Insurance addresses claims for the treatment of specific diseases or health conditions to a maximum extent of Rs. Rs. 80,000/-.
Section 80U that falls under health and well being aspect benefits physically disabled assesses in particular to a maximum extent of Rs. 1.25 Lakhs.
Section 80E takes into consideration the interest payable on Education Loan aspect and benefits all students who avail Education loans for higher studies. No ceiling has been laid for availing Tax benefits under this section.
Section 24 takes into consideration the interest payable against Housing Loan and Home Improvement Loans. A maximum deduction of Rs. 2 Lakhs can be claimed as Tax benefit towards Home Loans and Rs. Rs. 30,000/- towards Home Improvement Loans.
Section 80EE offers an additional deduction to the extent of Rs. 50,000/- on the interest payable towards Home Loan specifically for first time home buyers.
Tax savings can be done on amounts contributed in the form of donations for various cause of services as given below.
Section 80G provides tax relief for all contributions made to specific Charitable Funds and Charitable Institutions
Section 80GGA provides tax relief for all contributions made towards rural development and scientific research
Section 80GGC provides tax relief for all contributions made towards political parties
A couple of sections that does not fall under any of the above are given below
Section 80GG provides tax relief by allowing payment of rent to the maximum of Rs. 60,000/- when one does not hae a HRA benefit
Section 80TTA provides tax relief by allowing deduction up to Rs. 10,000/- for all interests accrued through investments in Savings Account