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ET Wealth Wisdom Ep 59 (ET Online)

7 tax savers to check before you invest again

05:29 Min | February 28, 2020, 1:49 PM IST
Before you start looking for tax saving investments under Section 80C, do a small exercise to determine how much you have already committed towards it. In this episode of ET Wealth Wisdom, we will tell you if you need to make additional tax saving investments this year.
Transcript
Hosts: Tania Jaleel, Shambhavi Mehrotra
Producer: Paramveer Singh

Hello and welcome to another episode of ET Wealth Wisdom. I am Shambhavi Mehrotra and I am Tania Jaleel.

I want this to end, already Tania.

What, more boy problems, have we?

I'm so not in your good books. And btw, I meant my taxes. My tax saving books are not good either.

What with it being the fag end of tax saving season, in this week's podcast we will talk about 7 tax savers you should check before you make fresh tax saving investments

And before you do that, run a small exercise to find out how much you have already committed towards it. And then decide how much more you will have to invest or claim this year.

Here are those 7 tax-savers you need to check

1. EPF
An employee contributes 12% of his basic pay towards EPF, which qualifies for tax benefit under Section 80C.

Your employer will have to match this minimum contribution of 12% of basic pay but you, the employee, will not get a tax benefit on it.
Listen carefully now…

Of the employer's contribution, 8.33% (on a maximum salary of Rs 15,000, i.e., Rs 1,250) is diverted towards EPS and the balance 3.67% goes to the employee's PF account each month.

So check your employee's total contributions for the year and count it towards Section 80C benefit.

That sounds like hard work

Hard work yes, but hard work that will mean less work figuring out where to invest to save on tax

2. Life insurance premium
If you have a life insurance policy, keep it active by paying renewal premiums because these qualify for tax break under Section 80C.

If your policy lapses, revive it by paying unpaid premiums, if you feel the policy is worth it.

You are eligible to claim tax benefit under Section 80C on the entire premium paid (including the previous unpaid premiums) up to a limit of Rs 1.5 lakh.

3. Home loan principal repayment
The principal repayment for your home loan, partial or full, gets you tax benefit under Sec 80C too.

The home loan EMI constitutes both principal and interest.

4. Home loan interest payment
The interest component in the EMI can also be claimed as deduction from "income from house and property" under Section 24.

The maximum tax deduction allowed is Rs 2 lakh for self-occupied property for which the loan is taken. Remember that if the property is under construction, the benefit is delayed.

5. Tuition fees
Parents can also claim deduction for tuition fees for up to two children within the overall limit of Rs 1.5 lakh under Section 80C.

What about donations and the like that you pay the school? Can that be claimed?

Nope… payment towards any development fees or donation to institutions does not count.

What if both parents are taxpayers? Can both claim the deduction…

That is another nope… the deduction can be claimed by the parent who made the payment.

6. Health insurance
Renewal premiums for health covers qualify for tax benefit under Section 80D. On the premium towards self, spouse, children, parents, the maximum deduction is Rs 25,000 a year, provided the individual is not older than 6o years.

If the premium paid is towards health policy for a parent (senior citizen above 60 years), the maximum is Rs 50,000.

A maximum of Rs 5,000 spent on preventive health check-up can be availed as deduction under section 80D, but this is within the overall cap of Rs 25,000 or Rs 50,000 (whichever is applicable).

7. Education loan
The interest paid on a higher education loan for self, spouse, children or for a student under your guardianship qualifies for tax benefit. Loans taken for siblings, relatives do not qualify.

Oh so having kids does not pinch that much, is it?

Please don't get ideas Mehrotra…

Moving on… The amount paid as interest in a financial year is eligible for deduction without any limit. The principal amount repaid does not qualify for tax benefit

You will get the full amount of interest paid as the deduction for eight years from the date of taking the loan or until the interest is paid in full (whichever is earlier).

Hope all of you got that. Check out our other podcasts on tax saving

That is right.. check out episode 3 to find out if you have your tax saving right, if you are young earner listen to episode 6, and episode 53 will tell you how you can avoid excess TDS deduction from salary

Stay tuned all of this month for more tax-saving help. Also, also, don't forget to subscribe to our Facebook, Twitter and Instagram pages

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