Must know Tax Saving Tips For Financial Year 2020-21

Here comes the December month and taxpayers start thinking about the tax saving schemes that can help them save their tax outgo. As a salaries individual, one need to submit the proofs of tax savings in Jan month with employers. This year you need not ask here and there are we are collating all tax saving options at one place. There are various schemes for tax deductions from taxable income that may help in lowering your taxes/.

Budget for FY2020-21 introduced optional tax regime with however taxpayers opting for tax deductions through saving schemes may find it useful. So without further discussion lets get straight to these tax saving options that may lower your taxes.

Saving Schemes covered under Section 80C: Section 80C offers deduction from taxable income to the extent of 1.5 lacs. Some of the popular schemes covered under 80C are as follow

1. Equity Linked Saving Scheme or ELSS. It is a type of mutual fund scheme that invests in equity shares. It offers tax saving with 3 years of lock in.
2. Life Insurance : Any premium paid towards Insurance be it Term plan or traditional insurance is covered under this section for tax deduction.
3. Unit Linked Insurance Scheme : It is again an Insurance scheme that offers capital appreciation or return of premium apart from life coverage.
4. 5 year fixed deposits : Tax saving fixed deposits with bank with lock in of 5 years or more.
5. PPF or Public provident fund : It is a Govt saving scheme with variable interest rate and 15 years of lock in.
6. NSC or National Saving Scheme : Is it Post office saving scheme with fixed interest rate and 6 years of lock in.
7. Tution Fees for Children : If you are parent of children who are into their education, the tuition fees paid by you for max.children are deductible from taxable income.
8. Home Loan Principle to the extent paid in the current financial year for the house that is occupied by you is covered for deduction.

Interest Paid on Home Loan: If you are paying interest on the home loan, the amount to the extent of Rs.200,000 is exempt paid towards the interest of self occupied property.

National Pension Scheme or NPS : An additional deduction of Rs.50,000 is allowed under section 80CCD (1B). Thus, you may save tax while planning for your retirement.

Health Insurance : All Health Insurance taken are allowed for deduction form taxable income under section 80D of the Income Tax Act. The premiums paid for self and family are allowed as a deduction from tax up to a maximum of Rs.25,000. However, for health plan for your senior citizen parents, you may claim an additional deduction of Rs.50,000 making the total available deduction of Rs.75,000.

Claim a deduction on your savings account interest earnings :- The interest earned, if limited till Rs.10,000 in a financial year, is allowed as a tax deduction under Section 80TTA. So, if you earned an interest on your saving account, claim it as a deduction. For Senior citizens, this limit is Rs.50,000 and interest amount also include interest earned on fixed deposits as well.

Taking advantage of all such tax saving options, an individual with salary upto Rs.9.85 lakhs, may not be required to pay any tax or we can also say zero tax outgo.

So, as such, if you are a salaried employee, you may claim an additional standard deduction of Rs.50,000 from your salary income for the financial year 2020-21. Taxpayers can also make donations to a charitable cause and earn deduction under Section 80G.

Hope you will find this article crisp and useful. Wish you all the best for your tax saving for current financial year.