10 Perfect Tax Saving Ideas that Salaried Individuals Must Know Before Filing ITR

Saving tax is always a challenging task. Every taxpayer thinks about it and considers the best options to save tax before or at the time of filing ITR. But it is more important to apply the tax-saving ideas before filing the income tax return or at the beginning of the financial year. Perfect planning could save a huge part of your tax. Let’s check out the perfect 10 ways that fall under 80C by which salaried individuals can save tax up to 1.5 lakh rupees annually.

Fixed Deposit (FD)

Fixed Deposit is one of the tax-saving instruments that you consider first before anything else. It can save up to Rs 1.5 lakh as tax. it is invested with a tenure of 5 years. At present, on FDs, you can get up to a fixed interest rate of 7-8 percent. Note that, interest earned on this is taxable. Tax deductions on FDs are allowed under section 80C.

Equity Linked Savings Scheme (ELSS)

Equity Linked Saving Schemes (ELSS) is one of the best ways of investing and saving some bucks on taxes. Such schemes have a lock-in period of 3 years. A long-term capital gains tax of 10% is applicable on its returns. Long-term capital gain is tax-free on redemption up to Rs 1 lakh in a financial year, subject to a tax of 10%.

Public Provident Fund (PPF)

It is a government savings scheme, by which one can save on taxes. Such schemes have a lock-in period of 15 years and their interest rates change every quarter. At present, the interest rate on PPF is 7.1%, but earlier, it was more than 8%. The interest earned on PPF is tax-free under section 80C.

National Savings Certificate (NSC)

This is the oldest yet best savings scheme for those who don’t want to take such risks on their investments. There is a fixed interest rate on national savings certificates (NSC) for 5 years. At present, the interest rate on NSC is 6.8% per annum. You can invest an unlimited amount in NSC, but you can only get tax exemption up to Rs 1.5 in a financial year.

Life Insurance Policy

Indeed, life insurance policy is vital for everyone. But a very few people know that it is one of the tax-saving instruments that can save on your tax. There are several types of life insurance policies like term insurance, ULIPs, and endowment plans, by which you can save tax up to Rs 1.5 lakh annually. For this, the insurance cover must be 10 times the annual premium.

National Pension System (NPS)

A national pension scheme is a voluntary retirement plan. You can invest in it to save money for retirement and can take a monthly pension after retirement. National pension schemes allow you to save up to Rs 2 lakh as tax, i.e. Rs 1.5 lakh under 80C and an additional tax of Rs 50,000 under 80CCD (1B).

Employees' Provident Fund (EPF)

This is a scheme for everyone – salaried individuals, self-employed, unemployed, or even retired. Anyone can invest any amount i.e. from Rs 500 to a maximum of Rs 1.5 lakh per annum, to their PPF account. One can invest 12% of their earnings in EPF every month and get an exemption up to 1.5 lakh annually under section 80C. It has a fixed return set by the government every quarter.

Tuition Fee

If you have children and you are paying a tuition fee for their education, you can claim an exemption up to 1.5 lakh rupees annually under section 80C.

Senior Citizen Savings Scheme

Senior citizen saving scheme, backed by the government of India, is for people above the age of 60 years. It has a fixed tenor of 5 years. In general, its interest rates are higher than FD. At present, its interest rate is 7.4% for the April-June quarter.

Sukanya Samriddhi Yojana (SSA)

The scheme is for the parents who have girls. In this, you can open a Sukanya Samriddhi Yojana account for a girl below the age of 10 years. It is for 21 years or till a girl gets married after 18 years. It falls under the category of EEE. Under this, investment, interest earned on SSA, and maturity are not taxable. As in PPF. One can start investing in this from Rs 250 to Rs 1.5 lakh per annum. At present, the interest rate in this scheme is 7.6%.