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5 Strategies People Use in Conventional Times to Save Tax

2-August-2021 |

Paying taxes feels similar to someone taking a bite off your ice cream that you so dearly wish to relish alone. Although most do not enjoy paying taxes, paying them helps the government improve public infrastructure and strengthen welfare schemes. In India, tax laws are governed by the Income Tax Act, 1961. Tax evasion is an offense, and income tax is calculated as per the income tax slabs set by the Ministry of Finance, with possible changes announced during the budget every year.

The good news is that your tax liability can be reduced by allocating capital to tax-saving instruments. There are several avenues for salaried or non-salaried persons with an income plan that can provide healthy tax-saving options.

Tax* Saving Investments Options

Under the Income Tax Law in India, you can avail of the benefits of reduced tax liability by investing in various tax-saving instruments in India, such as savings, insurance retirement planning, pension schemes, loans, etc. Here are some strategies individuals can use in 2021 and lower their tax burden by taking advantage of the provisions under the law:

 

  1. Under Section 80C (up to ₹ 1.5 Lakh per year)

    • Insurance


      For many insurance types, such as life insurance, ULIPs, term insurance, endowment policy, etc., the premium amount is eligible for tax deductions. You just have to ensure that your cover is at least ten times the annual premium.

      Insurance plans offer a unique combination of insurance and investments. This helps investors inculcate a healthy habit of savings and provide promised returns at the right juncture. Therefore, investors can invest in term plans, especially when they are young, and benefit from lower premiums. The payouts can be planned in anticipation of major life events.

    • Investments

      There are several investment schemes or tax-saving funds that offer tax deductions, for example:


      • Equity Linked Saving Scheme (ELSS).

      • National Saving Certificates (NSC).

      • Public Provident Fund (PPF).

      • Tax-Saver FDs (long-term extending more than 5 years).

      • Sukanya Samridhi Yojana (SSY) for a girl child.

      • National Pension Scheme (NPS).


      •  

  2.  

  3. Under Section 80D

    Medical insurance premiums paid are eligible for tax deduction up to ₹ 25,000 per year. This limit is extended to ₹ 50,000 for senior citizens.

     

    Under Section 80CCD(2)


    In addition to the Section 80C limit of ₹ 1.5 Lakh per year, individuals can also reduce their tax liability by another ₹ 50,000 by investing in pension plans, such as the National Pension Scheme (NPS). (Subject to fulfillment of conditions)

    One of the other tax-saving options for individuals coming from Hindu, Sikh, or Jain families is the Hindu Undivided Family (HUF) account. The Government of India recognizes HUF as a separate legal entity with a unique PAN and bank account, separate from the individual. You can earn a secondary income in the HUF account and file taxes according to the relevant income tax slabs, thereby saving on additional taxes had the income come to your existing salary account.

     

    Tata AIA Life Insurance offers a unique insurance savings plan, Smart Income Plus (UIN-110N126V04), that offers the benefits of a term insurance plan, along with reductions in your tax liability.

    You can choose the policy tenure to coincide with major life events, and be assured when the time comes, you will have much-needed liquidity.

     
    People also ask:

    • How much can I save from being taxed?

    • How can I save tax in 2021?

    • How is tax calculated?

     

    L&C/Advt/2021/Aug/1348

  4. Under Section 80CCD(2)

     

    In addition to the Section 80C limit of ₹ 1.5 Lakh per year, individuals can also reduce their tax liability by another ₹ 50,000 by investing in pension plans, such as the National Pension Scheme (NPS). (Subject to fulfillment of conditions)

  5. Under Section 24 and Section 80E

    A loan taken to construct or buy a home falls under the category of tax deductibles. The limit on principal amount is up to ₹ 1.5 Lakh as per Section 80C, whereas the interest amount has a limit of ₹ 2 Lakh per year as per Section 24 of the IT Act, 1961.

    Education loans taken for self, spouse, or children fall under the deductible category under Section 80E. Deductions apply to interest amounts only and are uncapped.

  6. Under Section 80G

    Donations to government-approved charities also fall under the category of tax deductibles. For most NGOs, the deductions are capped at 50% of the donated amount, and for some, a rebate of 100% is allowed.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimer
  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

  • Past performance is not indicative of future performance.

  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.

  • Please make your own independent decision after consulting your financial or other professional advisor.