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As a salaried or self-employed professional, you may want to minimize your liability while maximizing tax-saving benefits. If possible, you may want to break free of the tax net altogether. To help reduce your tax liability, the government offers you a variety of tax-saving options so that you can significantly reduce your taxable income, such as those under Section 80C and 80D of the Income Tax Act. If you are a first-time tax-payer, here are a few things that you need to keep in mind:
In a given financial year, in case your annual income exceeds the minimum tax exemption limit or Rs. 2,50,000, you are liable to pay income tax.
Whether you are salaried, NRI, self-employed or live in a HUF (Hindu Undivided Family), you are liable to pay tax if your income lies within the respective tax slab. Overall, there are three categories of individual taxpayers in India, based on age:
When it comes to tax saving, the most popular avenue is Section 80C. Under Section 80C of the Income Tax Act, you can claim tax deductions of up to Rs. 1.5 lakhs on the investments made into specified Instruments, in a particular financial year.
In other words, it is by investing in different income tax saving schemes such as term insurance, ULIPs (unit-linked insurance plan), ELSS (equity-linked savings schemes), National Savings Certificate (NSC), Public Provident Fund (PPF), Senior Citizens` Savings Scheme (SCSS), and five-year notified tax-saving bank deposits, you can reduce your taxable income by as much as Rs. 1.5 lakhs, while helping you meet your long-term goals.
The premium amount that you pay towards a health insurance plan is eligible for tax deduction under Section 80D. Under the Section; therefore, you can avail tax-saving benefits when you purchase health insurance for yourself, your spouse, parents, and children. The quantum of tax savings depends upon the age of the individual/s who are medically insured under the health plan.
Therefore, you can avail tax savings of up to Rs. 25,000, provided your age and that of your spouse and children is below 60 years. In case you purchase a health policy for your parents, who are senior citizens (their age is 60 years or more), you can avail a maximum tax deduction of Rs 50,000. Thus, if your age is below 60 years, while your parents are above 60 years of age, the maximum tax deduction that you can avail on the premium paid towards the health plan is Rs. 75,000 under Section 80D.
Moreover, if you are above the age of 60 and so are your parents, the tax benefit under section 80D is capped at Rs 1,00,000. Thus, if you are a first-time tax-payer, you might want to include a health plan in your portfolio, not only to protect your health from emergency medical treatment expenses but also maximize your tax savings.
First-Time Taxpayers! It’s Time to Maximise Your Tax Savings
Paying income tax for the first time, you must first assess your tax liability. You need to add all the earnings from different sources of your income, such as salary, and interest accrued on capital gains.
Subsequently, it would help if you calculated the total tax payable as per the relevant income tax slab. It is here that you can consider various tax saving instruments as specified under different Sections of the Income Tax Act to minimize your tax liability. Income tax saving schemes such as tax-saving mutual funds, public provident fund (PPF), an employee provident fund (PF) can help you save taxes.
Moreover, instruments such as life insurance and ULIPs from reputable insurers such as Max Life Insurance are not only one of the best tax saving plans currently available, but these also provide long-term financial protection against life’s uncertainties. Overall, you need to consider this – if you are a first-time taxpayer, you can quickly minimize your tax liability by choosing the best tax saving plan that aligns with your profile.
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