Tax Saving Schemes & Investment Options for 2022-23

  • Income Tax

TABLE OF CONTENTS

Introduction

Tax-saving schemes are essential in one's life since they provide tax deductions under sections 80C and 80CCC and various other sections. People typically desire to invest, given the significance of these assets. As a wise investor, it is essential that you seek out tax-saving schemes that not only save your money but also allow you to make tax-free income.

Tax Saving Schemes & Investment Available In India

Tax preparation is important, and so are tax-saving schemes. With the ideal tax-saving schemes in India, you may save money and make money. The beginning of the fiscal year is the preferred time to prepare for tax-saving investments. This will guarantee that you do not pay any more taxes and that you save taxes in India, as well as provide year-long profits on your tax-saving investment.

  • Term Insurance – Term insurance is a kind of life insurance offering pure protection with no links to the market. It offers your family cost-effective financial safety. The premiums you pay for term insurance might help you save money now by providing a tax advantage under section 80C. Premiums paid for term plans with a critical illness cover option are eligible for a deduction of up to Rs 25,000 under Section 80D.
  • Unit Linked Insurance Plan – A ULIP is a kind of insurance that combines investment and life insurance to provide financial protection for you and your family. Part of the premium paid is invested in the market, and the other part is kept for the premium for your protection. The amount paid on the maturity of your ULIP is eligible for tax benefits1 subject to section 10(10D) of the Income Tax Act, 1961.
  • Health Insurance – Medical insurance premiums are eligible for a tax deduction of up to Rs 25,000 every financial year under Section 80D. This restriction applies to health insurance premiums paid for yourself, your spouse, and your dependent children. If your age is 60 years or above the limit shall be extended to Rs. 50,000 every financial year. Also, you are eligible to claim deduction separately on the premiums paid to cover your parents under a health insurance scheme.
  • ELSS Mutual Funds – These are funds that contain a pool of various asset classes and can be traded like other stocks during trading hours. You may receive a tax credit of up to Rs 1,50,000 per year and save up to Rs 46,800 per year by investing in ELSS. The only kind of mutual fund eligible for tax advantages under Section 80C is an ELSS.
  • PPF – The amount invested during the financial year may be deducted up to Rs 1.5 lakh under Section 80C of the Income Tax Act. The interest and maturity amounts are tax-free since PPF is within the exempt category. PPF accounts typically have a 15-year lock-in term.
  • Sukanya Samriddhi Yojana – Section 80C of the Income Tax Act allows you to deduct your contributions to SSY. There are deductions of up to Rs 1.5 lakhs available. The full amount is tax-deductible if you invest a total of Rs 1.5 lakh in the plan in a given financial year.
  • National Pension Scheme – NPS subscribers may remove up to 10% of their pay from their NPS contributions (Basic + Dearness Allowance). NPS self-employed members may claim a tax deduction of up to 20% of their gross income or Rs 1,50,000, whichever is less.
  • Critical Illness Insurance Cover – Medical costs such as critical illness insurance, health examinations, and other medical expenses are eligible for the deduction. You may claim an Income Tax deduction of up to Rs 60,000 under this clause.
  • Endowment Plans – An endowment plan has tax advantages because the payable premiums, as well as the principal plan benefits, are qualified for tax exemption under Sections 80C and 10D of the Income Tax Act of 1961.

Maximum Tax Saving That You Can Avail Under Income Tax Sections

Section

Permissible limit (maximum)

80C

Rs 1.5 lakh

80CCC

Rs 1.5 lakh

80CCD

Rs 1.5 lakh

80D

RS 1,00,000

80DD

Rs 75,000 for general disability
Rs 1.25 lakh for severe disability

80DDB

Rs 1 lakh for senior citizens
Rs 40,000 for others

80E

No limit mentioned

80EE

Rs 50,000

80G

Different limits based on donation

80GG

Computed on the basis of rent paid and total income

80GGA

Depends on quantum of donation

80GGB

Depends on quantum of donation

80GGC

Depends on quantum of donation

80JJA

All profits earned for first 5 years

80JJAA

30% of additional employee cost

80LA

Portion of their income

80P

Portion of their income

80QQB

Rs 3 lakh

80RRB

Rs 3 lakh

80TTA

Rs 10,000 per year

80U

Rs 75,000 for people with disabilities
Rs 1.25 lakh for people with severe disabilities


How To File Income Tax Returns For Tax Saving Schemes?

To file returns online, go to the Income Tax Department's website. Your PAN will function as your user ID when you register. Go to e-filing for the applicable assessment year under 'Download' and choose the appropriate ITR form. Ensure your details are correct and you disclose all your income and investment amounts before submitting to get the maximum benefit and refund if applicable.

Frequently Asked Questions

  • Does term insurance come under 80C or 80D?

    The premiums you pay for term insurance can help you save money now by allowing you to deduct them from your taxes. You may deduct up to Rs 1.5 lakh in expenses under Section 80C.

  • Can term insurance be claimed under 80D?

    A lot of term insurance now includes supplementary health coverage. As a result, you may add a critical illness rider to your term plan. You may now claim deductions under Section 80D of the Income Tax Act since serious illness comes within the health category.

  • Is payouts from life insurance policy eligible for tax-benefits¹?

    Returns on life insurance plans are eligible for tax-benefits1 subject to conditions satisfied under section 10(10D) of the Income-tax Act, 1961.

  • How to claim 80C deductions?

    Investing in plans like term insurance, ETFs or ELSS can help you save up to Rs 1.5 lakhs under Section 80C on your taxes. Purchase medical insurance and deduct up to Rs 25,000 (Rs 50,000 for elderly persons) from your taxable income under Section 80D. Additionally, a contribution of up to Rs 50,000 to an NPS might result in extra tax savings under Section 80CCD (1B).

  • Which investment instruments provide tax-benefits¹?

    The public provident fund has been one of the popular investment options for decades. The PPF offers assured returns, and the interest earned, as well as the maturity amount. The PPF is a 15-year investment plan with a 5-year extension option.

  • Do I have to pay taxes on the investments?

    Short-term capital gains are taxed at the investor's income tax slab rates. However, long-term capital gains are taxed at either 20% (with indexation) or 10% (without indexation) under Section 112 of the Income Tax Act, whichever is favourable to the investor.

  • How many tax-saving schemes can one have?

    Any individual may have several tax-free investments; however, the yearly maximum depends on which section of the tax return they are claiming.

  • What is the maximum limit of investment under Section 80C?

    You may deduct up to Rs 1.5 lakh from your taxable income under Section 80C for certain investments. Section 80CCC, on the other hand, permits a person to deduct up to Rs 1.5 lakhs per year in payments to certain pension systems.

  • How can I reduce my taxable income?

    We tend to invest in many products that improve our quality of life but may also put us in financial distress. The government offers considerable assistance in the form of income tax waivers on direct taxes payable on your whole earnings.

  • What deductions can I claim without receipts?

    You cannot include any investment, contribution, or spending receipts with your returns. However, you may still include any new expenses, investments, or other items on your ITR. The Income Tax Department might request a copy of the receipts if necessary.

Disclaimer:

1 Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
IN ULIP, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY POLICYHOLDER.
ADV/6/22-23/600

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