The most common ways when you discuss how to save income tax is through life insurance policy or investments. In addition to these, there are several other ways to save taxes. Here are four tax-saving tips.
Investments
Investments are often used to invest today in order to achieve returns in the future. In addition to wealth creation, such instruments help save tax. Do you want to know where to invest money to save tax? You may invest in products, such as Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Savings Scheme (ELSS), Unit-Linked Insurance Plans (ULPIs), and many more.
All these instruments offer tax benefits according to section 80C of the Income Tax Act, 1961. While fixed-income products like PPF and NSC are risk-free, ELSS investments offer the potential to achieve higher returns. Additionally, the latter investments have a shorter lock-in period of three years compared to PPF that have a 15-year lock-in period. ULIPs are types of insurance plans that offer life cover along with the potential to earn market-linked returns through investments.
Insurance
In addition to providing life coverage, insurance policies are beneficial in reducing your tax liability. According to section 80C of the Income Tax Act, the premium paid on life insurance is eligible for tax deductions. In addition, health insurance premium for self, spouse, and children are eligible for tax benefits and are an excellent way to reduce your liability.
If you still have not availed of insurance coverage because you did not have responsibilities when you were single, it is now the time to purchase a policy. You do not want your loved ones to be in financial difficulties in case of any untoward incident. Additionally, health care costs are skyrocketing and a sudden illness may cause financial havoc. Therefore, you must avail of health insurance to ensure you receive the best treatment without facing financial difficulties.
Loans
Another option on how to save income tax is through loans. The principal paid on your home loan is eligible for tax deductions according to section 80C of the Income Tax Act. In addition, the interest on the loan is tax deductible according to section 24 of the Income Tax Act.
You or your spouse may have taken an education loan to pursue higher studies. Do you know that the interest paid on such loans is eligible for tax benefits? If you have not been taking advantage of this provision, it is time to use this option to reduce your tax liability.
Others
In addition to ELSS investments, PPF, NSC, and other eligible products, you may take advantage of other tax benefits. House Rent Allowance (HRA), medical bills, and travel allowance that may be part of your cost-to-company (CTC) offer tax advantages. You may provide bills or receipts to your employer to reduce your tax liability. In addition, any donation made to eligible charities is tax deductible under section 80G of the Income Tax Act.
A common question that you may have in mind is where to invest money to save tax! As mentioned above, there are several investment products and other ways that help reduce your tax liability. However, making the right investment decisions may be difficult and seem like a daunting task.
There is no reason to worry or stress. ARQ, the proprietary investment engine from Angel Wealth, helps you make the right investment decisions. Being the key highlight of Angel Wealth’s mobile application, this tool uses advanced algorithms and quants to analyze over a billion data points to evaluate the different investment options. This investment engine matches the best products to your investment goals, lifestyle, and risk profile. In addition, your existing portfolio is evaluated to offer recommendations to modify your investments, in case of any need. All this is done by robotic calculations without any human intervention or bias. Therefore, you are assured of receiving the best recommendations that will enable you to make the most out of your investments.
