Your employer may send you an email regarding your investment declaration i.e. the documents you need to submit as proof of your tax savings. When it comes to tax savings, usually older or experienced employees are able to spot the same immediately and make better moves. But if you are young and have started earning something new, then in this matter young people remain confused and often take wrong decisions. Come, here we discuss some special things, so that you can get some help.
Consider investing in equity linked savings schemes
Equity-Linked Savings Schemes (ELSS) are equity mutual funds with a diversified portfolio that give you an opportunity to invest in the equity market along with high returns. Apart from high returns, it also allows you to claim tax deduction under Section 80C of the Income Tax Act. The maximum amount of deduction that can be claimed is Rs 1.50 lakh in a financial year.
Can take health insurance policy
Treatment is becoming increasingly expensive. Inflation is increasing in this area in almost double digits. In view of this, it is necessary to buy health insurance. Health insurance allows you to reduce the financial risk associated with a medical emergency and take care of your hospitalization expenses during a medical emergency. Also, it allows you to claim tax deduction under Section 80D of the Income Tax Act for the amount of premium paid in a year.
The deduction amount for paying premium on insurance for self, dependent children and spouse can be up to Rs 25,000. An additional claim of Rs 25,000 can be made for parents. Also, if you or your parents are senior citizens then the total limit can be up to Rs 1,00,000.
Consider Financial Planning
It is not that you should do financial planning only if you are in the income tax slab. Young earners fall within the tax free limit (Rs 2.5 lakh under the old tax regime and Rs 3 lakh under the new tax regime). Filing income tax returns helps in creating a paper trail that can act as proof of income while applying for a loan or any credit product.
Invest as per target
Target is very important in investment. Always have a clear objective while starting an investment and based on that choose the right amount, tenure and type of investment. For example, you want to buy a car worth Rs 10 lakh in the next 4 years. In such a situation, you can start investing in equity mutual fund schemes like ELSS, which will give you better returns along with tax benefits.
always be active
Always try to be proactive when it comes to tax planning. Avoid last minute rushing, as this can lead to wrong investment decisions and mistakes. Start your tax planning at the beginning of the financial year. This gives you a full year to find the best tax saving avenues as per your needs. One more thing, you should ensure that you file the income tax return on the due date. Generally its date is 31st July. On delay, you may have to pay various penalties, interest and late fees. You can seek expert advice for help in preparing financial plans and filing taxes.
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