How to Save Tax? Income Tax Saving Tips For Beginners

The significance of understanding the nuances of taxation cannot be stressed enough. While it's essential for all individuals, but especially beneficial for young earners.Besides helping in overall financial planning, a broad knowledge of the various tax-saving provisions can be utilised to trim tax liability as well as maximise income legally and efficiently. Here's an overview of some great tax saving options for beginners and young earners.

Having health insurance must be the top priority for all working professionals. Health coverage not only cushions the financial burden in the event of an unforeseen medical emergency but is also an effective tax-saving strategy.The premium paid for self, spouse, dependent children or parents’ is tax-deductible up to Rs 25, 000 under Section 80D. In fact, you can enjoy a deduction of Rs 50, 000 if your parents fall in the senior citizen category (60 years and above). And yes, don’t forget to get a preventive health check once a year as it is also exempted from tax.

If you are not carrying life insurance , buy one. Besides safeguarding your loved ones in the event of your untimely demise, as a policyholder, you are eligible to receive tax benefits as well.The term insurance premiums are exempted from tax under 80C up to Rs1.5 lakh in a financial year. To ensure a low premium, the cover should ideally be about 10-15 times your annual income. For example, a 25-year-old who buys a 35-year term cover of Rs75 lakh will have to dish out an annual premium of just Rs 6, 000.

These days many youngsters prefer opting for education loans to pursue higher studies rather than dipping into their parents’ savings. Well, there is some relief for taxpayers who have availed a loan to shoulder the hefty tuition fees. While the principal amount is not exempt, the interest component of the education loan is tax-deductible for a maximum of 8 years under Section 80E of Income Tax Act, 1961. You can take advantage of this provision by reimbursing the borrowed sum from the commencement of the loan period for eight successive years.

• When you are young, you can afford to have a higher risk profile and investing in ELSS is a good option.
• Apart from good return potential, it is the only mutual fund scheme that offers tax benefits under Section 80C.
• It has the lowest lock-in period (3 years) among all tax-saving avenues. As per section 80C, investments up to Rs 1.5 Lakh in ELSS can be deducted from the taxable income.
• They are held for at least 3 years and are classified as equity funds, they come with certain tax benefits on capital gains too when you sell the fund.
• Long-term capital gains of up to Rs 1 lakh is exempt from any tax liability . Gains above Rs 1,00,000 are taxed at 10%.

• It is a safe investment option for long-term investing through which you can enjoy guaranteed returns alongside tax benefits under section 80C.
• The minimum and maximum investment allowed in PPF in one financial year is Rs 500 and Rs1.5 lakh, respectively.
• The interest is compounded annually, and the lock-in period is 15 years. A provision in the law, however, enables premature closure of your PPF account after 5 years albeit with an interest rate penalty of 1%.

Now that you are armed with some of the best tax-saving tips , go ahead and embark on a seamless tax-planning journey. Start evaluating the tax-saving instruments to choose the ones which match your specific needs.Ready to make the most of your money? Start your tax planning journey now!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.