7 Smart ways to save tax before 31st March

Whether or not you have submitted tax proofs to your employer, there is still time to make the most of saving taxes for financial year 2015-16. Other than LTA and medical bills reimbursement, many of the deductions and exemptions can be claimed directly in your tax return. Here are some tips to save taxes before its 31st March 2016.

  • Purchase an ELSS fund: ELSS is a type of mutual fund with a 3 year lock in period. Returns from an ELSS fund are fully exempt from tax. If you haven’t yet maximised your Section 80C limit of Rs 1,50,000, do so now by picking a top performing ELSS fund. Unlike some of the other eligible investments of Section 80C, this is a one-time investment. If you are up for some risk (this is equity linked), make ELSS your top pick to save tax this season. You can remain invested beyond the 3 year period and enjoy reasonable returns.

 

  • National Pension Scheme or NPS: If you are earning in excess of Rs 10lakhs, consider investing in NPS. Additional deduction of Rs 50,000 can be claimed under new section 80CCD(1B). Though currently withdrawals (on maturity, after attaining 60 years of age) are taxable, it is expected these will be made exempt similar to PPF and NSC. Once a NPS account is opened a minimum investment of Rs 6,000 is required annually (there is no upper cap). Since NPS invests in equities, there is opportunity for higher returns. You can also choose how much of debt/equity mix you need in your fund or request for an auto mix which is set by your fund house. Taxpayers in private jobs will benefit from investing in pension funds.

 

 

  • 5 year tax Fixed Deposit: Those who pay no tax or are in the lowest bracket, may consider putting away money in a 5 year fixed deposit and claim deduction under section 80C. Returns are low and are not tax free. However, this is the easiest way to save tax at the last minute. Returns may be attractive for senior citizens, who get higher rates of interest as well have high exemption limit. These deposits are safe to make and readily available in case of emergencies.

 

  • Postal Schemes like NSC: NSCs and other post office time deposit scheme (5 years) offer decent returns and are eligible to be claimed within the Rs 1,50,000 limit of Section 80C. Interest is earned @ 8.5% and is fully taxable. NSC interest can be claimed each year under section 80C (except in the last year). These investments may require a visit to your local post office and some paperwork. A term of 5 years or 10 years can be chosen for NSCs. This may be good for those who are risk averse and want decent returns.

 

  • Public Provident Fund: PPF is a great choice for those looking for secure investment and stable returns and don’t have enough time to evaluate other options. At a tax free return of 8.7%, this is a safe bet for conservative investors. Lock period is 15 years and a decent corpus can be built in this time frame. A max amount of Rs 1,50,000 can be invested each year and deduction is covered under section 80C. Minimum amount required to be invested yearly is Rs 500. A lot of banks allow online access of your PPF account and you can even transfer money from your bank account to your PPF account online.

 

  • Donations: Tax payers who wish donate to causes of their choice as well as save tax can pick a donation eligible under section 80G. Not all donations can be claimed under section 80G. 80G specifies the list of donations that are eligible, make sure to look up the list before you invest. Also, not all can be claimed fully, some are only allowed up to 50%. These donations must also be made via a cheque or a demand draft. Donations in cash are only allowed up to Rs 10,000. While making the contribution do remember to note down details such as name of the donee, PAN & address of the donee; deduction cannot be claimed in your tax return without these information.

 

  • Health Insurance: This year the deduction allowed under section 80D for health insurance has been enhanced. Now a maximum deduction of Rs 25,000 can be claimed to secure health of yourself, your spouse and your kids. You can also insure your parents and claim additional Rs 30,000. If your parents are more than 80 years old and are uninsured, you can claim their medical expenses up to Rs 30,000. However, the total deduction for parents should not exceed Rs 30,000. A small visit to the hospital can set you back by a few thousands, securing health of your family and claiming this tax benefit is good for the health of your family as well as your pocket.

 

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