10 Tips for Better Tax Planning and Savings in India

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Tax is an inevitable occurrence in every professional’s life. No matter how much we intend to save it, it is never enough. Paying taxes is the duty of every responsible citizen, but the sheer complexities in the tax exemption sections, documentation, and submission of proofs have made this a dreaded process. Paying lump sum taxes is definitely stressful and you need to look for avenues how you can reduce your tax liability.

Listed below are the most popular tax-saving investment ideas that will enable you for better tax planning in India.

  • Safeguard your family with life insurance

This is by far the often taken route if you want to save taxes. Investing in life insurance policies not only gives you a life cover but also provide you with complete security from unforeseen circumstances. You need to pay a pre-determined sum as a premium every year and in lieu of that, your beneficiaries will get a lump sum in the event of death. These premiums are allowed as tax exemptions; according to Section 80 C. Life insurance is the easiest way to plan your tax savings. However, life Insurance is all about security; the returns you earn at maturity are usually low as compared to market-linked investments.

  • Consider Unit-Linked Insurance Plans (ULIPs)

ULIPs are an innovative way to reap the benefits of life insurance as well as market-linked returns. Investments in ULIPs also allow you to avail of tax benefits as per Section 80C. The money invested in ULIPs is placed in the equity markets so that you can also grow your money while enjoying a life cover.

  • Invest in health insurance

With the rising cost of healthcare, it has become a necessity to save and invest for it in case of emergencies. Health insurance or medicalim policies allow you to arrange adequate finances to keep you covered during your sudden medical expenses. Investment in mediclaim is exempted according to Section 80D of the Income Tax Act.

Apart from insurance policies there are many tax-saving investment tips include:

  • Open a tax-saving fixed deposit

You can opt for any amount as per your requirements and open a fixed deposit account for availing tax benefits under Section 80C. The tax-saving fixed deposit account has a lock-in period of five years. In addition, the interest amount that you receive at the end of five years is taxable.

  • Ensure security with Public Provident Fund (PPF)

PPF is a useful way of saving taxes if you are planning to invest your money for a long term. The lock-in period is 15 years and you will receive a fixed rate of return on your investment. PPF gives you the flexibility to invest a minimum sum of INR 500 each year to keep your account operational.

  • Save taxes and earn returns Equity-Linked Savings Scheme (ELSS)

Tax savings cannot be the only goal of your investments. You also need to look at earning decent returns. The best way to do so is to invest your money in ELSS. The lock-in period is of three years but you must stay invested for at least a period five years to reap full benefits. Your money is invested in equities of handpicked companies while offering you the benefit to get tax exemption. Through the best tax-saving mutual funds, you can get a tax exemption of up to INR 1.5 lakh under Section 80C. There are many tax-saving funds in the market but you need to do your homework and track the performance and investment strategy of each of these funds. You need to pick the best mutual funds for tax exemption after doing a thorough research.

  • Opt for a Post Office Time Deposit

Just like the tax-saving fixed-deposit, you can also save a lump sum amount of money in the Post Office Time Deposit and avail of tax exemptions as per Section 80C. The minimum amount that you need to put in this scheme is INR 200.

  • Save additionally with National Pension Scheme (NPS)

The National Pension Scheme (NPS) was launched in 2009. This scheme allows you to save INR 1.5 lakh as per Section 80C. Additionally, you can avail up to INR 50,000 over and above the INR 1.5 lakh amount according to Section 80CCD (1B). You are free to choose the asset class in which you want to invest. You can opt for equity, government debt, or corporate debt.

Not just investments, availing certain loans can also help you enjoy tax exemptions:

  • Use home loans for tax-saving

Housing loans are quite a useful way to save taxes. The principal amount paid throughout the financial year is eligible for a deduction of INR 1.5 lakh under Section 80C, while the interest component is eligible for a deduction of INR 2 lakh under Section 24. You can also claim extra benefits if you are a first-time homebuyer.

  • Tax benefits with a house renovation loan

Most of us are aware that loans for house purchase and construction are eligible for tax exemptions. However, not many know that loan towards renovation is also counted as an avenue for tax exemption.


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