There's a slight nip in the air and there are a galore of offers from e-commerce bigwigs; the festive season it seems has arrived. While this is certainly a time to splurge and be merry, do consider putting away a little bit of your funds to save tax.
- Open a PPF account – Need a secure investment that gives tax free returns? Consider PPF. Withdrawals from PPF are also exempt from tax. You can deposit a maximum of Rs 1,50,000 in a year and earn a tax free interest of 8.7%. Amount deposited each year is allowed a deduction under section 80C. Section 80C allowed you to reduce your taxable income by the amount you deposit. PPF matures after 15 years, and if you continue to put away money in it, you'll have a large corpus on maturity.
- Make additional deposits to EPF – 12% of your basic salary is deducted each month and deposited in EPF, employer also contributes to it. Find out from your company if they allow you to make additional deposits to your EPF. A lot of companies allow employees to put in a higher % in their EPF. A spare Rs 10,000 may get spent from your pocket, but will be put to good use when you keep adding to your EPF kitty. If you plan to complete 5 years at your current organisation, you would land up an even larger sum by these extra deposits. EPF withdrawals are tax free after 5 years of employment.
- Consider an ELSS fund – Equities have had a bear phase recently and it seems like a good time to enter. If you don't want your money to get locked for long term, look up a fund house that has a good performance and buy an ELSS mutual fund. ELSS purchases are also covered in Section 80C. And come with a lock in of 3 years. You can also enrol into a SIP to get into ELSS. A SIP or systematic investment plan means that you make small deposits monthly (or some other interval) instead of a lump sum. Your returns shall be fully tax free besides the Section 80C benefit.
- Buy a medical insurance – Consider securing the health of your family via a medical insurance. A deduction of Rs 25,000 is allowed under section 80D. If you have parents who are senior citizens, you can claim Rs 30,000 to secure their health. For uninsured super senior citizens (more than 80 years old) medical expenses up to Rs 30,000 can be claimed under section 80D. Do note that you can claim a maximum of Rs 30,000 in this section, so plan it well. If your parents are super senior citizens you may claim Rs 30,000 medical expenses for them, while your spouse can insure you as a couple & kids for Rs 25,000. That way, both of you can take the benefit.
Make the most of the festive season! Now that six months of the financial year have gone by, do spend some time to plan your taxes.
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