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Mutual Funds | 25 Aug 2021

Want To Save Tax? Here’s Everything You Need to Know

Savings work as an excellent financial back for the future, and everyone follows the practice of saving money. But saving money is not that easy as it seems to be. Everyone wants to spend a portion of their earned money buying their dream house, cars, bikes, or any other area of their interest. So in the lure of buying their favorite things, they find it difficult to save their money.

But by spending their money and not saving it, they disregard the crucial role of saved money in the future needs of you and your family. But the ones who are aware of saving their money are also entangled in the web of taxes. Who would want to let go of their money through the means of taxation? For rich people, paying taxes might not be a problem, but the poor sections of society and those who have just started earning might not be able to bear the expenses levied in the taxes.

There are a number of ways and means in which a person pays taxes, and there are ways through which you can save these tax amounts. There are taxes of two types, namely:

  1. Direct taxes

These are taxes that are applied to the amount of income you earn in a year.

  1. Indirect taxes

These are taxes that are applied to the amount we spend on different things. Additional spending has varied amounts of tax levied on them.

Today, we will highlight the top ways through which you can save your tax-paying (both direct taxes and indirect taxes) in the form of investments. The benefit of tax saving can be best enjoyed by means of investments. You need to invest your money in order to accomplish your financial goals. The more you invest, the more your income will be.

Tax Saving Investment Plans

  1. Life insurance

If you are a single person earning money for your family, the best option for saving your tax money is investing in a life insurance policy. It is a safety net that claims to provide financial protection to your family members in the unfortunate occurrence of your death. By investing in the life insurance policy, you make yourself free from the burden of securing a promising future for your family or loved ones. In return, you are required to pay timely amounts at regular intervals, which sum up as a lump sum amount to be delivered to your family in the event of your death.

How it helps in tax saving?

A question might have come into your mind as to how this scheme helps in savings taxes. Here is how it will lower your payable amount as tax.

The amount of premium you pay at regular intervals is deducted from the total amount of your income. The less your income is, the less will be the amount you have to pay as tax. The maximum amount of deduction from your total income is Rs 1.5 lakh.

  1. Health insurance

This investment method for saving taxes also includes investment in insurance policies, i.e., health insurance. A health insurance policy is an assurance of tackling your health problem needs. Everyone is aware of the fact that health is the primary money for any person. If you are not stable or good in health terms, there is no need to save taxes. Health insurance will work as a shield against every financial need required to maintain good health.

How it works?

With guaranteeing to help you with your financial needs for your health problems, health insurance is an excellent way to exempt taxes on your total income. The person who invested in this policy is provided with an amount deduction up to Rs 25000 annually against the premium paid. However, the deduction limit can be exceeded by 25000 Rs more if the policyholder is above 60. Along with providing tax deduction, you also get an amount of Rs 5000 against any expenditure on health checkups for you, your family members, children, and your spouse.

  1. National Pension Scheme(NPS)

Another means through which you can save your payable tax amount is through investment in the National Pension Scheme. NPS offers its users a number of investment options and varied Pension Fund choices. Through this, you can reasonably plan your investments and also monitor the growth in the amount of your pension corpus. The investors are provided with the option of switching their investment options and can also change from one fund manager to another.

How it helps in tax savings?

To encourage the investment in the National Pension Scheme (NPS) and help the people in tax saving, the income tax department has allowed a deduction of Rs 50000 and above the amount of Rs 1.5 lakh available under Section 80CCE. An individual who deposited any amount in his National Pension Scheme account is provided with a deduction of 10% from his basic salary (for salaried people) and a 20% deduction from their total income. This ultimately results in lowering the tax amount paid by the individual on his total income.

  1. Public Provident Fund

Another way of saving the taxes is through investment in Public Provident Fund (PPF). It is a scheme backed by the central government and can be trusted to the fullest. It is one of the best schemes that provide efficiency in tax saving and is more suitable for the people who work on a salaried basis. It is a long-term investment option that allows you the benefit of tax savings and provides you interest on the amount invested by you on the PPF account.

How it works?

Under Section 80C of the Income Tax Act, a person is allowed a cash deduction amounting to 10% of his total earned income. However, the account holder has to be regular with his deposits for one year to enjoy the benefits of cash deduction. Anyone with the same limit can claim the deduction, and the maximum deduction allowance is Rs 1.5 lakh, including all investments in a year.

  1. Employee Provident Fund(EPF)

Another helpful way of saving payable tax amount is by investing in Employee Provident Fund. This scheme is best suitable for the employees in India. (NOTE: only permanent Indian residents can enjoy the benefits of Employee Provident Fund). As an employee, you have to pay specific amounts from your salary in the Employee Provident Fund. This amount counts as the total contribution made by the employee in EPF. The total amount is returned to the employee with additional amounts through interest earned.

How it works?

The amount of contribution made by the employee in the Employee Provident fund works as a tax breaker under Section 80C of the Income Tax Act. Like all the above investment plans for saving tax, EPF also has a maximum deduction amount equal to Rs 1.5 Lakh. This amount is calculated with 12% of the salary amount that is deducted from the employee’s salary as necessary returns. This will help you with amounts of funds and help you with tax savings.

These were some of the best tax-saving options through investments. If not suitable for you, you can invest in the following options to tax savings.

• Senior Citizen Saving Schemes

• Term insurance

• Unit Linked Insurance Plans

• Equity-Linked Saving Schemes

• Tax Saving Fixed deposits

These options were among the best tax-saving opportunities available to date. Investing in any of the above options will provide you with guaranteed tax-saving benefits and help you save amounts that can work as financial cushions for your future.

The Money Spring tool

Many people might be confused with the above options and face trust issues with some policies. So a good way of planning investments and monitoring your money flow is by accessing the Money Spring tool. The tool provides you with the best investment options and early advantages of any scheme. You are advised to invest in the above options with Money Spring. Here are some of the investing options provided by experts of Money Spring through which you can save taxes.

• Fixed deposits

• Insurance policies of every type

• Mutual funds

• Portfolio statements

Final thoughts

Paying taxes is hated by every person. But you as a citizen in India enjoy many facilities provided by the government. So you are a respectable citizen who has the duty of paying taxes to enjoy the benefits offered by the government. People who are earning higher incomes than the limits of tax exemption are required to pay taxes to the government. But being middle-class families or ones who are not able to bear the tax expenses, you can invest in any of the above options and get an assurance of tax exemption to a particular limit.

You can get access to the money spring tool with the below link:

CTA Link to sign up for the free tool-

https://app.moneyspring.in/auth/login

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