How to Save Tax in India in 2017


Most of the tax payers in India are looking for ways to save tax. However, there is very little awareness among the masses. As a result, they end up paying higher taxes. There are various options like PPF and life insurance schemes that can help people save tax in India in 2017.

If you are working individual in India and your salary falls in the taxable range, you need to pay the income tax to Indian government every year. Most of the people who are filing taxes for the first time (or initial few years) are not aware about the methods to save tax. This is mainly because in India, the parents do not discuss the financial issues and schemes with their children. Again, we are not much inclined to such terms and schemes as they are not of much use when we are not earning. However, the situation changes when we get employed or start seeing good profits in a business. In this post, I will provide some effective and simple methods to save tax in India.

Tax saving is one of the useful mediums for achieving financial freedom and planning your savings. In India, you can reduce the byrden of taxes, by making use of various provisions in section 80 D and 80U.
Section 80 C investments

SECTION 80 C investments include:
Here are some of the 80C investments:


  1. Bank Depsoits (of 5 years or more)

  2. Post office deposits

  3. Senior Citizen Savings Scheme

  4. Contributions to PPF

  5. Employees provident fund

  6. Tution Fees of Children

  7. Home loan


You can avail tax benefits for investments made through section 80C. The maximum benefit allowed is Rs 1 lakh.In case, your income is in the range of 2-2.5 lakhs, you can save entire income tax with the help of 80C investments. Similarly, the middle class and upper middle class can also save a lot of taxes with the help of these benefits. Let us discuss the different options and their benefits in brief:

Public provident fund
You can open a PPF account either in a bank or a post office. You are required to make the deposit for a minimum of 15 years. The money deposited in PPF account is free from taxes. You can get tax benefit for up to 1 lakhs.

Provident fund
The employee provident fund provides an interest rate of 9.5%. The investment made in PF is completely tax free.

Life insurance premium
You can get tax-benefits on the premiums for life insurance. You can also avail the tax benefits for the premium paid on the life insurance of your life partner and children.

Bank fixed deposit
You need to make the fixed deposit for minimum for five years to avail the tax benefits. An important thing to remember here is that the interest obtained on the fixed deposit is taxable.

National savings scheme (V11 issue)
You can also claim tax benefits for investments made on the National Savings scheme. These are available as certificates of Rs 100, 500, 1000, 5000 and 10000.

Post office time deposits
The post office time deposits can also be used to claim tax benefits. This investment also offers good interest rate. It is even better for the senior citizens as they get special interest rates.

Senior citizen saving scheme
Interest up to 10.5% is available in the senior citizen saving scheme of banks. Income tax should be charged to interest. Term of senior citizen saving scheme is 5 years.

Other Methods to save tax
There are various other methods to save taxes in India. You can get tax benefits for the investment made in tuition fees for your children. You need to provide the fees receipts to avail these benefits.
I hope this post helped you to understand the common methods for techniques for minimizing the tax burden from your shoulders. However, I strongly suggest you to consult a financial planner (CA) as he can give suggestions for saving taxes depending on your earnings and expenditures.


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Comments

Author: Partha Kansabanik20 Jan 2017 Member Level: Diamond   Points : 4

This is an useful article, especially when the financial year is coming to close. However, I have noted that the author has only discussed about Section 80C of Income Tax Act in this article. The author has stated that the maximum limit of tax saving under this Section is Rs. 1 lakh. In actuality, it is Rs. 1.5 lakh per person per annum. Under this Section, the author has mentioned almost all alternatives, except Equity-Linked Savings Scheme (ELSS), where the minimum lock-in period is 3 years. This option is risky but most profitable.

In addition to Section 80C, there are various other provisions in the Income Tax Act, by which tax can be saved over and above Rs. 1.5 lakh (Section 80C). Some of these provisions are mentioned below:-

Section 80CCD:- This is a new provision. If a person has subscribed to Natonal Pension Scheme (NPS), he/she is eligible for an additional tax benefit of Rs. 50,000/- p.a. (maximum).

Section 80D:- A medical insurance policy is a must for the protection of the entire family of a person in case of medical emergency or accident. If a person does not have any medical insurance, medical bills during such emergency can simply finish the unfortunate person's entire savings. So it is necessary to have medical insurance for every family. A provision has been made in the Income Tax Act under Section 80D allowing an additional tax deduction of maximum of Rs. 50,000/- in respect of medical insurance premia.

Section 80DD- This Section deals with expenditure on the health of a disabled person in the family. This deduction is available to the tax-payer for the expenditure incurred by him/her on the health and maintenance of a disabled family member (spouse, children, brother, sister) who are dependent on him. The maximum deduction admissible under this Section is Rs. 75,000/- per annum. This limit is increased up to Rs.1,25,000/- p.a. in case the dependent is suffering from severe disability.

Section 80DDB:- This deduction can be claimed on expenditure on a specific disease. The deduction amount is equal to the amount actually expended or Rs. 40,000/-, whichever is less.

Section 80EE:- This Section is relating to payment of interest on home loan. The maximum deduction that can be claimed under this section is Rs. 50,000/- p.a.

Section 80G:- If a person donates in a fund notified by the Central Government, he/she is eligible for deduction of the amount donated.

Section 80GG:- If a person does not receive HRA as a part of salary, then he/she can claim this deduction under this Section.

Section 80GGA/Section 80GGC:- If a person donates to specified institutions and to the political parties, he/she can claim these deductions under this Section of Income Tax Act.

Section 80TTA:- Interest earned on saving bank accounts is allowed as deduction under this Section.

I expect that the author will write a second part of this Article and cover these Sections for the benefit of common people. Overall, a laudable effort.

Author: umesh25 Jan 2017 Member Level: Gold   Points : 1

Verma ji and Kansabanik ji you together have made the story complete. All the aspects are covered very nicely and I will be keeping a copy for my reference.
I want to add -
1) The senior citizen scheme account is to be opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits. This scheme pays higher interest than the usual fixed deposits.
2) Another good area of investment is Govt./ PSU non taxable long term bonds where interest is tax free.
3) Interest earned in Saving Bank Accounts is presently tax free up to Rs 10000.
I hope in next update or next part all these aspects will also be incorporated.
Thanks.



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