Looking For Last-Minute Income Tax Saving Options? Here's What You Can Consider

A lot of taxpayers around this time of the year scramble to make tax-saving investments. The investments done before March 31, 2023, can be used to claim a deduction under the old income tax regime while filing the ITR for FY23.

If you are still looking for tax-saving investments, then it is important to first determine how much you need to invest. You also need to consider investments and expenses such as employees' provident fund, life insurance premium, tuition fees, home loan, etc which can be claimed as a deduction of up to Rs1.5 lakh under Section 80C. Firstly, understand the various tax-saving options and then decide which option is most to you based on your financial goals and risk appetite.

Here are some options for you to save tax 

Public Provident Fund

It is a popular small saving scheme backed by the government. The scheme enjoys an exempt-exempt-exempt tax benefit. Also, note that the amount invested, interest earned as well as withdrawals on maturity are all tax-free. Apart from PPF, NSC, SSY, and SCSS are other options. You can opt for NSC, PPF, SSY, and SCSS from a recognised bank or post office.

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ELSS

Another option is investing in Equity linked savings schemes or ELSS through a systematic investment plan (SIP). ELSS mutual funds invest at least 80 per cent of their assets in stocks and hence are exposed to market risks. Units of these schemes held by investors are subject to a lock-in of three years from the date of allotment. 

NPS

The National Pensions System (NPS) is another option. The deductions that people who make NPS contributions are eligible for are covered by Section 80CCD of the Income Tax Act.

Health Insurance

You can also purchase medical insurance for  Rs1 lakh under Section 80D . The deduction is available to individuals paying the health insurance premium for self, spouse and dependent children. Moreover, if an individual pays premium for health insurance policy of their parents, then an additional deduction can be claimed under this section.

It is important to note that the amount of deduction that can be claimed under Section 80D depends on the age of the insured person. If a taxpayer below the age of 60 years has paid health insurance premium for self, spouse and dependent children, then he/she can claim a deduction of Rs 25,000 for the financial year. If the health insurance premium is paid for parents below 60 years of age, then an additional deduction of Rs 25,000 can be claimed. Thus, an individual who pays the health insurance premium for self and parents can claim a maximum deduction of Rs 50,000.

Also, note that the amount of deduction is different for senior citizens. If the age of the insured person is 60 years or more, then a maximum deduction of Rs 50,000 instead of Rs 25,000 can be claimed. Hence, the maximum deduction under Section 80D varies between Rs 50,000 and Rs 1 lakh.

Home loan

Under this provision, interest on home loans is also eligible for a deduction of up to RS50,000. Any charity may notify funds or institutions to seek a deduction under Section 80G.

Tax saving fixed deposits

Fixed deposits are suitable for seniors and risk-averse investors. You can claim a tax deduction under Section 80C for investment in tax-saving FDs which have a tenure of five years.  FDs offer a fixed assured rate of return and there are no premature withdrawals.

Taxpayers can also opt for online tax planning tools that can generate personalized tax-saving reports. However, make sure that you plan tax savings at the right time.