Tax planning is a vital component of personal finance and helps you maximize your income by taking advantage of tax-saving instruments and deductions. In India, Section 80C is the most common tool for tax savings, allowing deductions of up to ₹1.5 lakh annually. Instruments like Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), National Pension System (NPS), and life insurance premiums fall under this category. For instance, ELSS not only saves taxes but also offers high returns due to its equity exposure.
Another useful section is 80D, which allows deductions for health insurance premiums. You can claim up to ₹25,000 for yourself and your family and an additional ₹25,000 for covering your parents. If your parents are senior citizens, this amount goes up to ₹50,000.
Homebuyers can also benefit under Sections 80C and 24(b), which allow deductions for principal repayment and interest paid on home loans, respectively. The interest deduction can go up to ₹2 lakh annually for self-occupied properties.
Tax-saving fixed deposits and Sukanya Samriddhi Yojana are other safe options for those with a low-risk appetite. Additionally, contributions to NPS provide an extra deduction of ₹50,000 under Section 80CCD(1B).
Proper tax planning involves aligning your investments with financial goals. For example, if you’re saving for retirement, NPS or PPF could be ideal. ELSS suits long-term wealth creation goals. Reviewing your tax-saving strategy annually ensures you are maximizing benefits while keeping investments relevant to your needs.
