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4 Ways in Which You Can Save More Taxes in 2020

Tax Saving Tips For 2020: Check out various ways on how to save taxes in 2020. Click here to know the best tax saving investment options low, middle and high-income individuals can benefit.

January 30, 2020 / 04:46 PM IST

As we enter into a new year, we hope to fulfil our personal and financial goals. We look at the different investment options ahead of us, the objectives we hope to accomplish and the many ways in which we can increase our savings. Effective tax planning plays a crucial role in helping us improve our annual savings. As, such, it is essential to devise a clear and precise tax-saving plan in the new year and consistently implement it throughout the year as well to ensure there are no last-minute glitches. Here's what you should do. 

  1. Exhaust popular tax saving options under 80 first

Under Section 80C of the Income Tax Act of 1961, there are several tax savings options under which low, middle and high-income individuals can benefit. For instance:

  • You can save approximately ₹150,000 on different types of investments including Public Provident Fund, Voluntary Provident Fund, investing in Equity Linked Savings Schemes. 

  • You can claim deductions of ₹25,000 to ₹50,000 on health insurance premiums paid for self, spouse and children

  • You can get tax deductions of ₹150,000 on the principal amount component of your children's education fees. 

Then you have the National Pension Scheme which falls under Sections 80CCD (1), 80CCD (1b) and 80CCD (2) respectively under which you can claim deductions of ₹150,000, additional ₹50,000 and additional deductions of 10%, respectively. It would be best if you tried to exhaust these regular tax deduction options first. 

  1. Take on a home loan before the end of the financial year to avail extra tax benefits

If you are contemplating investing in property, you should consider buying it before the fiscal year ends in March 2020. If you take on an affordable home purchase loan in FY 2019-2020, you can avail a tax deduction of ₹150,000 on the principal loan amount as per Section 80C of the IT Act. Also, under Section 80EEA, you can avail a tax-deduction benefit of another ₹150,000 for payment of interest on the home loan, if the property is self-occupied. Furthermore, under Section 24b, you can avail tax deductions benefit of an additional ₹200,000 on the interest component of your home loan. 

Note that tax benefits under section 80EEA are applicable only for home loans sanctioned between April 1, 2019, and March 31, 2020, and only if you do not own any other property. Other eligibility criteria include the property size and actual value of the property (in which the stamp duty must not exceed ₹4,500,000). 

  1. Book LTCG on your equity investments

In a financial year, if your long-term capital gains or LTCG on your equity investments exceed ₹100,000, you have to pay a 10% income tax on the amount exceeding this threshold. Thus, the best way to ensure you don't have to bear this additional tax is to book your LTGC every year, so that your gains do not exceed the taxable limit. This is especially true if your investment portfolio majorly comprises of equity instruments. You can reduce your tax liability overall by saving the 10% tax on LTCG.

  1. Claim medical expenses for your parents as a means of tax deduction

Health insurance plans for senior citizens generally come with high insurance premiums, which can put a massive dent in your savings. However, if you are paying for your parents' health insurance plans, you can benefit from several tax reductions. As per Section 80D of the IT Act, you can save approximately ₹25,000 to ₹50,000 respectively for purchasing insurance premiums for your parents (under the age of 60 and senior citizens, respectively) and for bearing the cost of their medical expenses in general. However, you must keep all the medical bills as proof to claim tax deduction benefits

Final word: If you are tax outgo is high, it could be attributed to poor management of funds. A higher tax outgo can also serve as an obstacle in allowing you to achieve your financial goals. Therefore, you mustn't leave your tax planning for the last minute. Take stock of your savings, review your investments and make the most of the tax benefits provided by the Government of India. Invest in any of the above mentioned tax-savings instruments, which can help you achieve your financial goals in 2020.
Moneycontrol News
first published: Jan 30, 2020 04:46 pm
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