Only 11 days are left from today (March 21) for the financial year 2024-25 to end. This also means that only a few days are left for those who have opted for the old tax system to save income tax this financial year. So, this is the right time to get into action to save your taxes! If you are looking for tax-saving instruments that provide income tax deductions to reduce your taxable liability, you can opt for some investment options that are capable of saving your taxes. Do you also want to know how you can save your tax? So let’s know.
ELSS
Investment in ELSS of mutual funds is eligible for tax deduction. ELSS comes with a lock-in period of 3 years, and is also riskier than other investments in this segment, as ELSS are linked to the stock market. According to Ujjivan Small Finance Bank, by investing in it, you can claim tax deductions of up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act from your gross total income. To claim these deductions, investments must be made before March 31.
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National Pension System
The National Pension System is a retirement savings scheme that offers additional tax benefits under Section 80CCD. NPS allows you to build a pension fund. Contributions up to ₹50,000 made to NPS are eligible for tax deductions over and above the Section 80C limit of ₹1.50 lakh. It encourages long-term savings for retirement with attractive investment options. Market-linked returns with higher growth potential than traditional instruments are available. If you are self-employed, 20% of your gross income can be claimed as a deduction.
Health and Life Insurance Premiums
You can also save tax by buying health insurance or life insurance. Under Section 80D of Income Tax, you can claim a deduction on premiums paid for health insurance for yourself, your spouse, children, and parents. As per the current provisions, the maximum deduction allowed is ₹25,000 (or ₹50,000 for senior citizens), which promotes health and financial security. However, to avail of tax benefits, ensure that the annual premium is less than 10% of the sum assured.
PPF
PPF or Public Provident Fund is a long-term investment option that offers attractive interest rates and returns on the amount invested. It offers tax exemption of up to Rs 1.5 lakh under Section 80C of Income Tax. To avail tax exemption, you must open a PPF account under this scheme before March 31 and the amount deposited during a year can be claimed as a deduction under Section 80C. Anyone willing to invest in PPF can start with a minimum investment of Rs 500. However, the maximum investment amount is Rs 1,50,000 per year.
5-year tax saver FD
For tax savings, you can consider tax saver FDs or post office fixed deposits in any scheduled bank. However, the minimum investment period should be 5 years. Apart from bank FDs, post offices also have a 5-year fixed deposit scheme in which you can invest money. While the interest earned on the FD amount is taxable, a tax deduction of up to Rs 1.5 lakh is allowed under Section 80C of the Income Tax Act, 1961.
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