Rajkotupdates.news: Tax Saving PF FD and Insurance Tax Relief – If you are presently paying a considerable amount of tax on your insurance or FD, you may be very keen to know about the tax-saving opportunities available to you. All your investments under this particular scheme are exempt from any tax deductions as per section 80C. A regular FD usually offers higher returns but is devoid of any type of tax benefit.
Here we will clearly outline the various tax reliefs available at your disposal and will explain what every one of these usually means from the point of view of finance. Here we will discuss the various pros & cons of every option and help you decide the best one for you. If you are keen on saving money on taxes, then read on to know some useful facts that will allow you to save taxes considerably.
All about the tax saving PF, FD & Insurance
Once the Income Tax Return (ITR) filing season commences, the salaried class usually starts planning to save as much tax as possible.
The salaried class is not only concerned about saving tax but also preparing a considerably good fund for their retirement. Here we will discuss five mighty options of Tax Saving PF FD and Insurance Tax Relief where you can smartly save tax and at the same time can build a huge retirement fund.
The various tools of tax saving
1. Tax Exemption from PPF & LIC Premium
Investing in PPF or Public Provident Fund is one of the best tax-saving options. The maturity amount & the interest in this particular investment are absolutely tax-free. This is one of the best ways to make a safe investment & build a very big corpus over a long period of time. Investment in a PPF account is eligible for the purpose of tax exemption under section 80C.
When it comes to a LIC policy, you can claim a tax deduction on the premium. Tax exemption can easily be availed as per 80C for a maximum amount of Rs. 1.50 lakh.
2. Tax saving by investment on EPF
Employees’ Provident Fund (EPF) is considered a very good option for salaried people to save on tax. In this tax exemption scheme, you can save a considerable amount of tax under 80C. The Central Board of Trustees manages EPF. You will be amazed to know that the interest you earn from a PF account is completely tax-free for an interest-earning of up to Rs. 2.5 lakh per annum. This is a great option for building a huge retirement fund.
3. Tax Exemption by investing in Equity Linked Savings Schemes (ELSS)
You will largely benefit in terms of tax saving under 80C by investing in Equity Linked Savings Schemes (ELSS) offered by the various mutual funds. ELSS is a very good mode of tax saving where you can receive very handsome returns. This is why ELSS is considered one of the mighty tax-saving options for salaried individuals, as it offers double benefits of tax saving as well as handsome returns.
4. Tax Exemption by investing on Tax Saving FDs
Tax saving Fixed Deposit is a great avenue for salaried earners to save a large chunk of tax. This is one such Fixed Deposit (FD) where you can save tax up to Rs. 1.5 lakh. This particular model of investment has a 5-years lock-in period. This is one of the safest tax savings options for salaried employees. Here you need to note that the returns you get after the maturity of a tax-saving FD are taxable.
5. Tax saving by investing in NPS
National Pension Scheme (NPS) is one of the best avenues where you can invest to save tax under section 80CCE. Investing in NPS means saving a maximum amount of 1.5 lakhs tax in a financial year. Apart from the same, you can also avail of an additional exemption of Rs. 50,000 under section 80CCD (1B). This is undoubtedly one of the best long-term tax savings options for the salaried class. This is also a great retirement plan.
More tax-saving avenues
Certain payments can lead to tax reductions in accordance with section 80C. These payments are as follows:
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Children’s tuition costs
The tuition fees for a maximum of 2 children can be claimed as a deduction within 80C up to an amount of Rs. 1.5 lakhs. This particular fee is applicable for the complete duration of the course. This specific benefit is specifically accessible by the payment of the tuition fees amount to any school/college/university/affiliated educational institution.
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Payment of tax-saving insurance premium
According to Section 80C, the annual fee that a taxpayer pays on his behalf or the behalf of his spouse/children is qualified for receiving tax relief. These deductions are permitted in case the amount paid does not exceed 10% of the insured amount.
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Tax savings on the repayment of an ongoing home loan
As per section 80C, a large portion of a loan for purchasing or constructing a house for residential purposes is eligible for tax relief. This deduction is extended in case the registration fees, property transfer cost and stamp duty fee are to be paid.
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Interest payment for an education loan
Tax deductions are available for the interest being paid on loans taken for paying higher education fees. In this case, there is no such threshold for income tax deductions.
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Premiums paid for medical insurance and also medical expenses
You will be eligible for a deduction on the cost of health insurance premium that you pay for any Health Scheme under the Central Government. The premium paid for the taxpayers, their spouse and their children are eligible for tax benefits. You can claim an amount of up to Rs. 25,000 under section 80D of the Income Tax Act. In case you are a senior citizen, you will be eligible to receive a deduction of up to Rs. 50,000 under this section of the Income Tax Act.
Other options of tax-saving other than the Section 80C
You can also go beyond Section 80C tax benefits and avail other smart tax benefits as a smart tax saver. These are as follows:
- Tax saving under Section 80CCD
This tax benefit can be availed by contributing to the NPS or National Pension Schemes. The deduction limit, in this case, is Rs. 50,000. As per the notification of the Central Government, the tax deductions claimed under this section can be made by employees, employers or the voluntary self-contributors. An additional tax deduction of Rs. 50,000 can be availed apart from the limit of Rs. 1,50,000 under Section 80C. The contributors to Atal Pension Yojana under Section 80CCD(1b) are also eligible for this deduction.
- Tax saving under Section 80D
Under this provision, you can save tax against the premiums you pay on health insurance policies.
- Tax saving under Section 80DD
You can avail of tax benefits under Section 80DD for rehabilitation or medical expenses that are paid for any individual who is handicapped dependent. The deduction limit is Rs. 75,000 for individuals with disability of 40% to 80%. Individuals with a disability above 80% are eligible to receive a tax benefit of up to Rs. 1,25,000.
- Tax saving under Section 80DDB
You can avail of tax benefits of Rs. 40,000 for medical expenses to be paid for a specific disability or illness for oneself or any dependent. The deduction limit becomes Rs. 1,00,000 in the case of senior citizens.
- Tax saving under Section 80E
Under Section 80E, you are eligible for tax benefits for the interest paid towards Education Loan. There is no upper limit in this case. The interest part of the EMI deducted against an educational loan is considered for tax benefits.
- Tax saving under Section 80EE
A deduction of Rs. 50,000 can be availed under Section 80EE for paying home loan interest for first-time homebuyers.
- Tax saving under Section 80G
You can avail of tax deduction by donating to Charitable Organizations, and there is no deduction limit in this case. The entire contribution that you make to any registered charitable organization is exempt from taxes under Section 80G. The transfers that are made through banking are considered for tax benefit and can be a limitless tax waiver.
- Tax saving under Section 80GG
Under Section 80GG, you can avail tax waiver on House Rent Allowance (HRA). This is applicable only if the HRA component is not included in the salary breakdown. The limit is Rs. 5,000 every month.
- Tax saving under Section 80GGA
You can avail tax waiver against Scientific Research and Rural Development donations under Section 80GGA. This is no deduction limit in this case.
- Tax saving under Section 80GGB
You can avail tax waiver against donations made to political parties or an electoral trust under Section 80GGB.
- Tax saving under Section 80U
Individuals who are with disabilities can receive income tax benefits under section 80U.
- Tax benefits under Section 10(10D)
You can avail of tax benefits on the matured Life Insurance Policy amount under Section 10(10D).
- Tax benefits on wills, gifts and taxation
The money received in the form of a gift is completely tax-free. If you receive gifts from your direct relatives, then that is completely tax-free, and also, there is no such upper limit on this particular exemption. If you receive a gift from any non-relative, there is an upper limit of Rs. 50,000 for the tax waiver.
Tax Saving PF FD & Insurance Tax Relief FAQs
1. What do you mean by the liability of income tax?
An individual who earns an income is liable to pay income tax to the government every financial year. As per the prevailing Income Tax Act, the government mandates to levy the applicable taxes that is based on the earned profits or income.
2. What do you mean by a fixed deposit?
A Fixed Deposit is a kind of saving where the money is being deposited for a fairly long period of time.
3. What is referred to as relief on insurance tax?
Relief on insurance tax is a tax break that is being offered to the income holders. This particular break can considerably reduce the tax amount to be paid.
4. How can you save tax by making an FD?
You can save tax by making a 5-years long tax-free Fixed Deposit. With this, you can earn handsome returns and also avail tax waiver.
5. How will you calculate the liability of income tax?
You can calculate your income tax liability by the following simple formula:
Sum of total earnings of an individual = Total Gross Income – Applicable Deductions = Applicable taxable income
6. Where can you file ITR?
You can log on to www.incometaxindiafuling.gov.in to file ITR yourself.
7. What are the mandatory documents required for filing ITR?
You will require the below-mentioned documents for filing ITR:
- Salary slips
- KYC documents
- Investment proofs
- Form 16
- Form 26AS
- Interest Certificate from post office/banks
- Every proof that is related to the tax waiver benefits
8. Can I avail tax benefits by paying the health insurance premium for my parents?
Yes, you can avail tax waiver under Section 80D of the Income Tax Act by paying the health insurance premium for your parents.
9. What are the tax deductions that you can claim under Section 80GG?
A taxpayer can claim a flat amount of Rs. 5,000 per month or Rs. 60,000 annually for paying house rent. The rent slips are to be produced as proof for availing of this deduction.
10. Who can avail of tax benefits under section 80DDB?
Individuals who are suffering from the following disorders can avail of tax benefits under section 80DDB:
- Neurological diseases like dementia, ataxia, Aphasia, Hemiballismus, Chorea, Parkinson’s Disease etc.
- AIDS
- Malignant cancers
- Renal failure chronic cases
- Hematological disorders
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