ITR: With the clock ticking down on the current financial year, the window to optimize your tax savings is rapidly closing. Come April 1st, the tax benefits associated with various financial instruments will no longer be available. So, this is your final call to take advantage of these options and minimize your tax burden. Suneel Dasari, founder and CEO, EZTax.in, a tax filing portal said, “While Chapter VIA offers numerous deductions, only those listed below contribute to greater tax savings: Sections 24, 80C, 80D, 80CCD, and 80G. Donations are governed by the Income Tax Act (ITA) and the Companies Act (CA) [replace GGA and GGC with the full names of the relevant legislation. Our only caution concerns timing: since it is already the last day of February, your employer may not have recorded the majority of the above investments yet. Therefore, it is advisable to retain the expense or investment receipts, as they will be helpful in the event of an inquiry by the Income Tax department.”
Let's explore some last-minute strategies to help you make the most of tax-saving opportunities before the deadline hits;
Assess Existing Tax-Saving Investments Done(Section 80C): “Evaluate current tax-saving investment options falling under Section 80C, such as insurance premiums, tuition fees, EPF contributions, and principal part of home loan repayments. Deduct this total from the Rs 1.5 lakh limit to determine the remaining amount eligible for tax-saving investments under Section 80C,” Abhishek Soni, CEO, Tax2Win, an income tax portal said.
Popular Section 80C Options: For those yet to exhaust the Rs 1.5 lakh limit under Section 80C, consider investing in options like LIC policies, public provident funds (PPF), fixed deposits (FDs), and tax saver mutual funds. These instruments offer tax benefits and cater to different risk appetites.
Explore Additional Options: National Pension System: If the Section 80C limit is already met, explore additional tax-saving avenues such as the National Pension System (NPS). Contributions to NPS (Tier 1) of up to Rs 50,000 are eligible for deduction under Section 80CCD(1B), providing an extra tax-saving opportunity.
Health Insurance Premiums (Section 80D): With the increasing burden of rising hospital expenses, investing in health insurance has become more crucial than ever. Not only does it provide financial protection against unforeseen medical costs, but it also offers valuable tax benefits. Under Section 80D of the Income Tax Act, individuals can claim an exemption of up to Rs 1 lakh for premiums paid towards health insurance purchased for themselves and their dependents, including parents. This effectively reduces your taxable income, leading to potential tax savings. While investments like life insurance also offer tax benefits under Section 80C, prioritizing health insurance ensures you're prepared for medical emergencies while maximizing your tax benefits. So, consider this a two-pronged approach towards securing both your financial well-being and reducing your tax burden.
“Consider investing in a medical health insurance policy for yourself and your family and paying for health check-ups. This deduction is separate from Section 80C and can help save on taxes while securing healthcare needs,” Soni added.
Charitable Donations (Section 80G): Those inclined towards charity can contribute to eligible charitable organizations before March 31, 2024, and claim deductions under Section 80G of the Income Tax Act. However, remember to adhere to the specified limits for tax benefits. The deduction can be claimed up to 50 per cent or 100 per cent of the donated amount depending upon the charitable organization.
Senior Citizens Savings Scheme: Senior citizens in India have until March 31st to open a Senior Citizen Savings Scheme (SCSS) account and benefit from tax breaks under Section 80C of the Income Tax Act. This government-backed scheme offers a secure investment option with a minimum deposit of Rs 1,000 and a maximum deposit of Rs 15 lakh. Individuals 60 years or older are eligible, along with 55-year-olds who have retired under specific schemes. Retired defence personnel can also participate at the age of 50 if they meet additional criteria.
The SCSS account boasts a five-year tenure with the option to extend it for another three years. This flexibility, coupled with the attractive interest rates, allows senior citizens to save up to Rs 1.5 lakh while enjoying tax benefits. Considering the closing date for availing the tax benefits for the current financial year, opening an SCSS account now can be a wise decision for those seeking a secure and tax-efficient way to manage their finances.
By carefully considering these options and aligning them with your financial goals and tax-saving needs, you can optimize your tax-saving investments effectively before the deadline. Consulting with a tax expert can also provide valuable insights tailored to your specific circumstances.
