9 Big 'Secrets' Behind Tax Savings We Probably Should Have Been Taught In School

One of the saddest things about adulting is paying taxes. No one ever tells you about it when you are a kid, and when you grow up, you are suddenly supposed to know how to file your taxes. How awesome would it have been if we were taught how to do our taxes in our schools, right? Well, never mind. We are happy to help you. Here are 11 secrets of tax savings that you need to know.

1. PPF Account  

The money you invest in your PPF account is not a part of your taxable income. The PPF contributions made by you are covered under section 80C of the Income Tax Act, 1961 which mentions the tax deductions. Earlier the deduction limit for PPF deposits was ₹1 lakh which has now been increased to ₹.1.5 lakhs.

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2. Medical Insurance

You get tax benefits on medical and health insurance under section 80D of Income Tax Act. The health insurance premium that you paid for yourself, your spouse, your dependent children or your parents qualifies for tax deduction up to ₹25,000. This limit has been increased from ₹15,000 to ₹25,000 since last year.

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3. NPS – National Pension Scheme

Income tax laws allow tax deduction for individuals who contribute to National Pension Scheme. This deduction is a part of the ₹1.5 lakh limit under section 80C. Up to 10% of the basic salary is put into the NPS by the company on your behalf and is deductible without any limit. The new section 80CCD(1B) under which a taxpayer can claim deduction for voluntary contribution of up to ₹50,000.

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4. Rent Paid

Under section 80GG of income tax act, 1961 deductions are applicable to a self-employed person, businessman and even to a salaried person for the expenses that they incur towards house rent. The amount you spend paying rent is not considered a part of your taxable income.

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5. Fixed Deposits At Post Offices

Five years fixed deposits can be opened with any branch of Indian Post Office. These deposit accounts work like any other fixed deposit account except that they have a lock-in period of five years and offer double benefit of return on investment and tax deduction.

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6. Life Insurance

The maximum amount that can be exempted from taxation under section 80C, 80CC and 80CCE is ₹1,50,000. Deductions are only allowed for premiums up to 20% of the sum assured during life insurance, if the value of the premium paid in a financial year for a policy is more than 20% of the actual sum assured.

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7. NSC – National Saving Certificate

An individual can invest any amount of money under the National Savings Certificate. However, tax deduction under section 80C can only be claimed for a maximum of ₹1,50,000. The National Savings Certificate is issued in denominations of ₹100, ₹500, ₹1000, ₹5000, ₹10,000.

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8. Money Received From PF After 5 years

You save tax on your PF account during the year of your investment. The good news is that you don’t have to pay taxes on interest received from PF investments. Though it is important to note that the interest received on FDs is taxable, unlike PF. You will have to keep your PF account active for at least five years before you start withdrawing money.

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9. ULIPs – Unit Linked Insurance Plans

ULIPs are the unit linked insurance plans. You get tax benefits on ULIPs at the time of investment as well as when they mature. Money that’s being invested in ULIP can be claimed as a deduction under section 80C, which is ‘life insurance’ or under section 80CCC which is ‘pension’. A maximum of ₹1,50,000 is allowed under section 80C/ 80CCC.

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