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5 Simple tips to save income tax at the eleventh hour
March, 22nd 2019

Tax saving is a year-long process and not a last-minute activity. However, if you haven’t done the needful yet, here are some easy options to go to without having to shell out a lot of money. However, don’t invest in these instruments blindly to save tax. Opt for these only if they fit into your larger scheme of financial planning.

1) Liquidate old tax saving investments and reinvest

You can reduce your tax outgo cost-effectively by withdrawing tax saving funds that have completed the lock-in period and reinvesting it to save tax going forward. Schemes such as ELSS can be withdrawn after three years from the start of the investment and PPF can be partially withdrawn upon finishing seven years. PPF investments can give you EEE tax benefits.

2) Invest in the National Pension Scheme

NPS is a lucrative pension scheme that can help reduce your tax liability by Rs 2 lakh (Rs1.5 lakh under Section 80 (C) and Rs 50,000 under Section 80 CCD (1B). In a recent development, the entire redeemable corpus of 60% has been proposed to be made tax free as opposed to the previous 40%. The annuity income however is taxed as per the applicable tax slab. With NPS, you can choose your mix of equity and debt.

3) Buy health insurance policy

If you haven’t invested in health insurance yet, you must add this to your financial portfolio to cover your hospitalization bills. Don’t rely solely on the insurance provided by your employer as the cover offered can only take care of your basic requirements, needless to mention, you would be without a cover if you were to transit from one job to another or take a career break.

Health insurance premiums are eligible for tax exemption under Section 80 (D) of the Income Tax Act. You can avail deduction to the tune of Rs. 25000 for premium contributions made for children, spouse and self. For parents above the age of 60 years, you can get an additional deduction of Rs. 50000.

4) Buy term insurance cover

Term cover is another crucial element in personal finance. So if you haven’t done the needful yet, buy a term cover to secure your family financially for a time when you may not be around. Your sum assured should be 10-20 times of your annual income, an amount substantial enough to replace your income, if you were to be faced with an untimely demise. The premium cost for term insurance is reasonably low. However, before you zero in on a product look for the claim settlement ratio.

5) Donate to eligible institutions

Donations made towards certain relief funds and charitable institutions are eligible for tax deduction under Section 80G. The extent of deduction offered may vary depending on the type of institution you are donating to.

 

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