So you want to save tax but have no clue how? Don’t worry; a few clever investments can do the trick for you. In fact, that is what most people do because the rates of tax are pretty high in India. Moreover, if you aren’t based in India, you would naturally look to pay as low rates of taxes as possible. The trick to do that, as I have said earlier, is to invest. The same goes for NRIs – Non Resident Indians living around the world.
Pension Funds and Investments
If you have pension funds, you can enjoy deductions! A deduction of a sum of up to one lakh is allowed to any individual who has made any contributions towards any personal or family pension scheme under the Life Insurance Corporation of India, which is under the government. The amount of pension which is received by the nominee or the contributor will be taxable after it is received though. However, the amount received after the scheme has totally matured is totally free of tax!
Medical insurance premium also exempts you from taxes – provided you make a payment via cheques. The amount exempted is fifteen thousand rupees if you are a citizen of India and twenty thousand rupees if you are a senior citizen.
Another way to save tax involves the interest amount which is paid on loans for higher education purposes from any kind of financial institution or any approved charitable organization. This deduction is applicable for about eight years. In addition to this, if you donate to government charitable organizations such as the Prime Minister’s National Relief Fund, National Defence Fund etc. you will enjoy exemption.
Physically challenged persons enjoy tax deduction, provided that their disability has been qualified by a certified medical practitioner who practices in any government hospital. In fact, if the physical disability is of a permanent nature or if the person has some mental retardation issues, then they can enjoy a tax deduction of about forty thousand rupees.
In order to find out the exact amount, one needs to look at the Income Tax Act of 1961 and see the disabilities enlisted. These sections basically certify people who have permanent disability or a fifty to sixty percent disability in the limbs as physically challenged. Those who have somehow lost their voice or are blind are also included in this category.
There are several other investments you can make in order to save tax in India. These include:
- Investing in monthly income schemes in a local post office.
- Investment in authorities who are looking to develop villages or cities or are actively planning them.
- Investing in banks and banking institutions.
- Investing in units of UTI and mutual funds.
- Investment in co operative services.
- Investment in any financial institution of any sort which are interested in working for the industrial development of the country.
- Investment in schemes which are approved by the central government like time deposit schemes, national saving schemes or even schemes involving recurring deposit.
- Investing in national Deposit Schemes.
Some Special investments
- Public Provident Fund – an exemption of up to seventy thousand rupees in a year.
- Premium life Insurance or even ULIP
- Provident Fund
- Infrastructure Bonds
- Equity Linked Savings Schemes which are basically under Mutual Fund Companies.
- Tuition Fees given by children
- Tax Saving Fixed Deposit Schemes with Banks.
There are sundry other ways to save tax as well. Authors, Musicians. Film directors and athletes are allowed to save tax – if they earn in foreign currency. So get smart today!