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Find out how your investments in best performing mutual fund and insurance cover for your family can save you taxes.

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Understand more about Tax Deductions

Section 80C of Income Tax Act allows an individual to or a hindu undivided family (HUF) to invest in tax saving instruments to reduce the income tax liability. You can invest up to Rs 1.5 lakh per year in various instruments listed under this section. The investment options under this section include life insurance premium, public provident fund, employee provident fund, Sukanya Samriddhi Yojana, National Saving Certificate, Five year fixed deposits with banks-post office, Senior citizen saving scheme, life insurance plans, equity linked saving schemes, principal repayment on housing loan, tuition fee paid for maximum two children’s education.

If used in a prudent manner, these investments can not only help you save income tax but also help you achieve your financial goals.

Section 80D of the Income Tax Act lets an individual avail deduction for health insurance premium paid. The health insurance premium paid for self, spouse, dependent children and parents is eligible for this deduction. One can avail of a deduction up to Rs 25,000 for self and family. In case of a senior citizen health insurance policy the deduction allowed is up to Rs 30,000. Within this limit deduction of Rs 5,000 is allowed for expenses incurred towards preventive health check-ups.

Section 80D of the Income Tax Act lets an individual avail deduction for health insurance premium paid. The health insurance premium paid for self, spouse, dependent children and parents is eligible for this deduction. One can avail of a deduction up to Rs 25,000 for self and family. In case of a senior citizen health insurance policy the deduction allowed is up to Rs 30,000. Within this limit deduction of Rs 5,000 is allowed for expenses incurred towards preventive health check-ups.

For super senior citizens with no health insurance, a deduction up to Rs 30,000 is allowed for the expenses incurred on medical treatment.

You should buy adequate health insurance to financially overcome a possible hospitalization of self or a family member.

This section allows tax deduction for expenditure incurred by you for medical treatment of certain diseases. These include Neurological Diseases (where the disability level has been certified as 40% or more), Parkinson’s Disease, Malignant Cancers, Acquired Immune Deficiency Syndrome (AIDS), Chronic Renal failure, Hemophilia and Thalassaemia. The tax benefit is capped on actual basis up to Rs 40,000 per year. If you are a senior citizen, then the benefit is lower of actual expense or Rs 60,000. In case of super senior citizen (80 years or above of age) this amount is capped at Rs 80,000.

To avail this benefit a medical certificate from competent medical practitioner is required.

Interest paid on education loan is eligible for a tax deduction. Under Section 80E of the Income Tax Act such interest paid on your education is deducted from your gross taxable income while computing income tax liability. The education loan can be taken for self, spouse or children. The deduction is available from the year the repayment starts and not from the year you availed the loan. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier

The tax benefit associated with interest on education loan is however not available for HUF.

Contributions made to prescribed funds fetch the much required tax break. Section 80G offers deductions up to 50% or 100% of the donation subject to the limits stated in the Income Tax Act. To avail the tax deduction one requires Name of the Donee, PAN of the Donee, Address of the Donee, and the amount contributed.

As proposed in Budget 2017, cash donations are capped to Rs 2,000 from tax benefit point of view. The donations made in ‘Kind’ such as donating utensils, clothes, books do not qualify for deductions.

If you are salaried individual but do not have house rent allowance or are self-employed and are paying rent for an accommodation for residential purpose, then you can claim tax deduction under section 80GG of Income Tax Act.

It comes with certain conditions-

You pay rent and you do not get any HRA, even for a part of the year.

You should not own and occupy any other house anywhere

You or your spouse or your minor child or your HUF must now own any house in the city you reside or work in.

If you satisfy these conditions, deduction available to you will be the lower of:

Rs 5,000 per month,

25% of your total income

Rent paid in excess of 10% of your total income

An individual gets a tax deduction under section 80U of the Income Tax Act if he is suffering from any of the stipulated conditions.

Specified disabilities:

Blindness

Low vision

Leprosy-cured

Hearing impairment

Locomotor disability

Mental retardation

Mental illness

If one is suffering from 40% or more from such conditions, he is entitled to a fixed deduction of Rs 75,000 irrespective of his income and expenditure incurred on the condition.

In case of disability of more than 80%, he is entitled to a fixed deduction of Rs 1.25 lakh irrespective of his income and expenditure incurred on the condition.

Rajiv Gandhi Equity Savings Scheme (or RGESS) was introduced in the Finance Act, 2012. New retail investor who complies with the condition of gross total income less than Rs 12 lakh can enjoy deduction under RGESS.

One can invest maximum Rs 50,000 for claiming deduction under RGESS. New retail investor gets 50% deduction of the amount invested from the taxable income for that financial year.

This investment has to be in the prescribed securities and subject to lock in period as defined in the Income Tax Act. Only individuals can avail of this tax deduction.

This can be availed of by an individual till March 31st 2017. This has been discontinued from FY2017-2018.

This section lets an individual or HUF to enjoy a tax deduction for interest earned on saving account with bank, co-operative society or post office to the extent of actual or Rs 10,000 whichever is lower.

This benefit is not applicable for the interest earned on term deposits.

Interest income earned from a saving bank account over Rs 10,000 will be subject to tax a per your slab.

Tax Saving with ELSS

ELSS has provided better returns compared to similar tax saving instruments. Also it has the lowest lock in period.

Investment Option Lock-In Period Return CAGR p.a. Tax Status on Returns Risk
PPF 15 Years 8.10% Tax-free Low
NSC 5/10 Years 8.00% Taxable Low
FD 5 Years 7.70% Taxable Low
ELSS 3 Years 17.80% Tax-free High
Which ELSS to Invest In?

Top Performing ELSS has been

  • Motilal MOSt Long Term Fund -DP (G)

    1 Year Return

    36.2%

    View Details

    Motilal MOSt Long Term Fund -RP (G)

    1 Year Return

    34.2%

    View Details

  • Mirae Asset Tax Saver Fund - DP (G)

    1 Year Return

    31%

    View Details

    IDFC Tax Adv. (ELSS) -Direct (G)

    Rating

    1 Year Return

    27.2%

    View Details

  • L&T Tax Advantage -Direct (G)

    Rating

    1 Year Return

    26.5%

    View Details

    IDFC Tax Advantage (ELSS)-RP (G)

    Rating

    1 Year Return

    25.9%

    View Details

  • L&T Tax Advantage (G)

    1 Year Return

    25.5%

    View Details

    JM Tax Gain Fund -Direct (G)

    1 Year Return

    24.6%

    View Details

  • Principal Tax Savings - Direct

    Rating

    1 Year Return

    24.3%

    View Details

    Principal Tax Savings

    Rating

    1 Year Return

    23.9%

    View Details

  • Reliance Tax Saver(ELSS)-Direct (G)

    Rating

    1 Year Return

    22.7%

    View Details

    JM Tax Gain Fund (G)

    1 Year Return

    22.6%

    View Details

Tax saving with life insurance

Premium paid towards securing life insurance cover from an insurance company is eligible for a tax shelter. Section 80C of Income Tax Act allows a deduction for an amount up to Rs 1.5 lakh per year for the premium paid to a life insurance company. As per the current rule, the sum assured of the life insurance policy must be at least ten times the life insurance premium paid.

All proceeds of a life insurance policy are tax-free in the hands of the beneficiary as per Section 10(10D) of the Income tax Act.

Tax saving with health insurance

Buying health insurance policy not only allows you to buy a health cover but also fetches a tax deduction under section 80D of the Income Tax Act. The health insurance premium paid for self, spouse and dependent parents is eligible for tax break. One can claim up to Rs 25000 for self and family. In addition to this, in case of senior citizen the tax deduction is extended to Rs 30000.

Health insurance policies include traditional hospitalization reimbursement health policies, hospital cash benefit policies, critical illness benefit policies among others.

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