In case you haven’t completed tax saving for this FY and still searching for the tax-saving investments, have a close look at your existing commitments and certain specified expenses made during the year.
March 31 is falling on a Sunday, which means less than 31 working days for completing your tax saving exercise for the financial year 2018-19. But, in case you haven’t completed your tax savings and are still searching for the best tax savers, have a close look at your existing commitments and certain specified expenses made during the year. They may be sufficient to help you meet the Section 80C limit of Rs 1.5 lakh per Financial Year for tax savings.
Here are seven tax savers that may well reduce your taxes even without making any fresh investment or buying any new tax saver for this FY. Here they go:
NO FRESH COMMITMENTS
1. EPF contributions of salaried individuals
The employee’s contribution, which could be 12 percent of basic salary or a higher amount ( through VPF) made towards the EPF qualifies for tax benefit under section 80C. Total the contributions from the salary slip to see how much you will contribute during the 12 months in this FY. Remember, employer’s contribution is not allowed tax benefit under section 80C.
2. Home loan EMIs: Principal repaid
The EMI that you pay towards the home loan consists of both principal repaid and interest paid. In the initial years, less of principal gets repaid, still the total amount repaid qualifies for tax benefit under section 80C. Ask your lender to share the tax certificate showing a break-up of principal and interest. If you have closed your home loan in this FY by paying the outstanding balance in full, even that qualifies for tax benefit.
3. Home loan EMIs: Interest paid
For the interest portion of the EMI, the deduction can be claimed under Section 24 of the Income Tax Act under the income head, “Income from house and property”. For a self-occupied property for which a loan is taken, the maximum deduction allowed under this section is interest of Rs 2 lakh every year.
But, if you are still paying EMI’s for an under-construction house, the benefit will be delayed. After possession, provided it happens within five years, the pre-construction (pre-completion) interest can be claimed from the year when the construction is complete and after getting possession, in five equal instalments. The principal portion, however, doe not get tax benefit for under-construction house.
4. Tuition fees for children
For a maximum of two children, the parents can claim a deduction for tuition fees (not development fees or donation to institutions ) paid during the FY. The parent who pays for the child’s fees gets the tax advantage and not both the parents.
5. NPS contributions
If you already have a NPS account, your commitment to pay in this FY will be there. Although minimum of Rs 1000 is required to keep your Tier I NPS account active, keep investing a higher amount to secure a decent pension in the retired years.
6. Life insurance premium
Similarly, if you have a life insurance policy of any nature – Endowment, money-back, Ulip or a pure term insurance policy, even the renewal premium qualifies for tax benefit under section 80C. In case, your policy is lapsed, you may revive it by paying unpaid premiums and yet get the tax advantage.
7. Health insurance premium
If you already have a health insurance cover, the renewal premium for the year will qualify for tax befit under section 80D. Importantly, keeping the policy active helps as it gets benefit of the waiting period for pre-existing ailments. Hence, renew health covers on time to avoid losing such benefits.
Also, if you are falling short of the limit and looking to get a health check-up done, there’s tax benefit as well. A maximum of Rs 5,000 can be availed for preventive health check-up but this limit is within the overall cap of Rs 25,000 or Rs 50,000 (whichever is applicable as per age) and is not exclusive of it.