If you earn a salary, you have to invest it well in order to reap maximum income tax benefits. Making investments in a tax saving vehicle is an excellent way to reduce your tax burden, even to zero. While most people opt for the latter, some also make the mistake of choosing investments that don’t give them maximum income tax benefits. Here are some tips for maximizing your income tax benefits:
If you are over 60, health insurance premiums are tax-exempt. If you are paying cash for health check-ups, you are eligible to claim a deduction of up to Rs. 50,000. If you’re below 60, the maximum deduction is Rs 25,000. In addition to Section 80C, there’s section 80D, which offers tax deductions of up to Rs 1.5 lakh. In short, you should get a health insurance policy.
Another way to maximize your income tax benefits is to buy a home. Section 80EE applies to first-time home buyers, and it allows for deductions on the interest you pay on your home loan up to a maximum of Rs. 50,000 every financial year. The property must have been purchased after 1 April 2016 and by 31 March 2017.
Setting up a family business is another way to maximize your income tax savings. If the business is new, it can still save you money in the early stages of its growth. However, once it has become well-established, it will become a cash cow and the income from business assets will increase significantly. To minimize your tax outflow, you can also create a HUF to distribute the income among the family members. This allows the income to be evenly distributed among the family members and reduce overall tax outflow.
There are many ways to save money on taxes. You can invest in many different tax-saving products. For instance, you can invest in tax-saving bank FDs that offer 8% p.a. The investment will grow and earn interest for five years. Once the FD matures, Ganesh will receive his original investment of INR 1,50,000 as well as any interest that has accumulated on it. However, keep in mind that the interest on the maturity of the FD is taxable, reducing the overall returns of the product. The post-tax return will be lower than the initial 8% investment.