Best Tax Savings Plans for 2019-2020: Strategies for Maximizing Tax Benefits

Effective tax planning is crucial for reducing financial burdens and enhancing overall savings. In the financial year 2019-20, India provided several avenues to investors to save on taxes through various deduction schemes and investment options. This article will explore the best tax savings plans, ensuring you can maximize your financial benefits.

Investment Under Section 80C

One of the most common and beneficial avenues is the investment under Section 80C. This section allows deductions up to Rs. 1.5 Lakhs on various investment options such as:

Equity-Linked Savings Schemes (ELSS) - these schemes provide fast lock-in periods and allow you to claim deductions up to Rs. 1.5 Lakhs per year. Public Provident Fund (PPF) - offers a lock-in period of 15 years and allows tax deductions up to Rs. 1.5 Lakhs. Tax Saver Fixed Deposits - while these provide lower returns compared to other options, they offer tax deductions up to Rs. 1.5 Lakhs. Unitholders of Unit Linked Insurance Plans (ULIPs) - these insurance schemes allow you to claim deductions under Section 80C, if the premium is paid within a specified limit (maximum of Rs. 1.5 Lakhs). Sukanya Samridhi Yojna - a government scheme for the welfare and education of girl child. Investments made under this scheme are eligible for tax deductions up to Rs. 1.5 Lakhs per year. Senior Citizen Savings Scheme (SCSS) - this scheme is designed for senior citizens and allows tax deductions up to Rs. 1.5 Lakhs.

The key here is to choose the investment that aligns with your risk appetite and financial goals.

Investment Under Section 80 CCD

For those who wish to go beyond the cap of Rs. 1.5 Lakhs under Section 80C, the Contributory Provident Fund (CCD) option under Section 80 CCD is an excellent choice. You can invest up to Rs. 50,000 to gain further tax deductions. This brings the total amount of deductions you can claim through Section 80C and 80 CCD to Rs. 2 Lakhs.

Health Insurance Schemes and Deductions Under Section 80D

For a comprehensive approach, consider the tax deductions under Section 80D. These deductions are available for buying health insurance for yourself, your spouse, and children. You can claim up to Rs. 25,000 as a deduction for these purposes. For senior citizens, the deduction limit is increased to Rs. 50,000. Additionally, if you buy a health policy for your senior citizen parents, you can claim a further Rs. 50,000 as a deduction, bringing the total to Rs. 75,000.

Education Loans and Home Loan Deductions

Education loan deductions under Section 80E and home loan deductions under Section 24 also offer valuable tax relief. If you have taken an education loan, you can claim deductions against the entire interest repayment during the relevant financial year. Similarly, home loan interest repayments can be deducted up to Rs. 2 Lakhs under Section 24.

Additional Considerations for Tax Planning

In addition to the above, consider the following tips for effective tax planning:

Track your investments and expenses: Keep a record of all your investments and expenses. This will help you claim deductions accurately. Consult a tax professional: A professional can provide personalized advice and suggest additional strategies for tax optimization. Stay informed: Tax laws and regulations are subject to change. Keep yourself updated with the latest updates to make the most of your deductions. Review and revise: Regularly review your tax plan to ensure it aligns with your current financial situation and goals.

Conclusion

Effective tax planning can significantly impact your financial wellbeing. By leveraging the various deductions and investments available under the Indian tax laws, you can reduce your tax liability and enhance your overall savings. Whether it's through Section 80C, 80 CCD, 80D, 80E, or 24, there are numerous options to explore to achieve your financial goals. Stay informed, stay proactive, and stay within the law to maximize your benefits.

Additional Reading:

5 Ways To Make The Most Of 2019 Financially 6 Amazingly Simple Ways For Better Tax Planning

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- Adhil Shetty

@adhilshetty