Every taxpayer must learn about all the legal ways to save tax. Proper tax planning can help you achieve this goal if you spend enough time to determine the ways that can work for you. Consider investing in the right tools to avail of tax benefits.
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Tax-exempt investments to claim tax deductions
There are various tax-exempt investments wherein you can invest to save tax and build wealth. Here are some of the most efficient choices:
Interest earned from the savings account
The interest earned from your bank savings account, post office, or co-operative societies is tax exempted under the Section 80TTA of the Indian Income Tax Act 1961 Up to an amount of INR 10,000. Anything interest earned more than this amount is taxable.
Health insurance premium
According to Section 80D of the Income Tax Act, you are entitled to get a tax deduction on the premium paid towards health insurance policies. The upper limit for the deduction is INR 1 lakh.
Tax benefits on education loan
You can reduce your tax liability while taking an education loan. You must mention this in the investment declaration section when filing income tax. The interest paid as Equated Monthly Installment (EMI) towards loan repayment has tax benefits according to Section 80E of the Income Tax Act, 1961. The education loan has to be taken for yourself, your children, your spouse, or your legal ward.
Tax savings from home loan
The interest paid towards your home loan comes with tax benefits. It is available as per Section 80EE of the Income Tax Act, 1961. Here are some of the important aspects of the exemption:
- The upper limit of deduction is INR 2 lakh
- The deduction is applicable only after the construction of the house is completed
- First-time homeowners are eligible to get an added deduction of INR 50,000. This benefit is only available for loans INR 35 lakh wherein the cost of the property should be lower than INR 50 lakh
- The tax deduction is applicable on the principal amount up to a limit of INR 1.5 lakh
- The amount paid on stamp duty and registration comes with a tax deduction of up to INR 1.5 lakh
Mutual fund investments
When it comes to tax-exempt investments, Equity-Linked Savings Scheme (ELSS) is the only form of mutual fund that offers tax benefits. According to Section 80C Deduction of the Income Tax Act, any investments made in ELSS are eligible for tax exemption of up to INR 1.5 lakh. Tax-saving investment options not only help you grow your money but also aid in saving taxes. You can build a favorable financial plan around these investments.