The last month of the financial year may be too crucial for those who have not planned their taxes well in advance. They may end up paying more taxes than what they would have if they had done there planning well advance. Here are last moment savings tips that would help in saving taxes and built a corpus for your retirement.
Even in the last minute, one can choose investments that would help in saving a major chunk of income from taxes. Often, we have done a few expenses in the year that can be claimed for deductions under taxes. Few of such expenses and investment that can help save the taxes are below.
Utilize section 80c, 80CCC, 80D
Under this section, one can claim in combination up to 1.5 lakhs tax deductions. Utilizing this section to the fullest can help one save a lot on taxes. The different tax saving investment avenues under these sections are:
ELSS (Equity linked saving scheme)
This is an equity-based investment fund that helps in tax deduction to up to 1.5lakh. If you are taking the last moment investment, then probably lump sum investment would be ideal, but if planned early one can choose the SIP route, where you can benefit from the power of compounding. ELSS funds have a lock-in period of 3 years and with returns up to 15%. The returns are subject to changes according to the market.
Employee Provident Fund (EPF)
This retirement scheme is available to all salaried employees and attracts an interest of 8.55%. The employer deducts 12% of the Basic salary, including the DA (dearness Allowance) of the employee and deposits the same in the fund. The per cent of deduction can also be increased by the employee if they wish to do so.
Employee Provident Fund amount can be withdrawn after 5 years of continuous service and is completely tax-free.
Public Provident Fund (PPF)
This is a savings scheme started by the government of India to help taxpayers save taxes and also get higher returns on the invested money. The returns in the PPF scheme is fixed, while the interest is revised by the government every quarter. The lock-in period for this scheme is 15 years.
National Pension Scheme – This scheme was introduced by the government of India to assure regular pension to employees after retirement.
National Pension Scheme is beneficial especially for employees from the unorganized Sector or working professionals. Returns on NPS are equity-based and can attract interest as high as 15 per cent. Under NPS, individuals can also claim deductions up to Rs. 50,000 under Section 80CCD(IB).
There are other deductions under these sections like the investment in insurance, fixed deposits and pension plans.
Utilizing Loans Efficiently
One can get deductions on the repayment of Principal amount of Home loan under Section 80C. Interest paid on home loans, and education loans are also available for a tax deduction.
Save By Investing in Charity
One can invest in charity or any philanthropic activity to claim tax deductions. Donations can help in claiming tax rebate up to 50 -100 %. This includes investment in national relief funds as well.
Try using the above methods to get the maximum advantage of tax planning within the remaining time left. Investing in these tax saving investment plans during the year can help you benefit more as compared to last-minute investment. Nevertheless, these plans can still help you a lot of the retirement corpus from taxes.