Don't solely focus on tax-saving alone.
As they say: 'Invest in a hurry, regret in leisure.'
If you've chosen the old tax regime, make an informed choice and don't rely entirely on your agent, particularly for Sections 80 C and 80 D.
Section 80C
Before you begin, note that your employee provident fund (EPF) would make up a majority of the Section 80C deduction. Take that into account before investing more in Section 80C.
"Section 80 reduces taxable income up to Rs 1.5 lakh per financial year for an individual or Hindu undivided family," says Alay Razvi, partner, Accord Juris LLP.
Familiarise yourself with the various instruments eligible for deduction under Section 80 C before investing.
These include contributions to the Public Provident Fund (PPF), equity-linked savings schemes (ELSS), national savings certificates (NSC), tax-saving fixed deposits and life insurance.
Lock-in period
Pay attention to the lock-in period.
Naveen Wadhwa, vice-president, research and advisory at Taxmann, says: "Various instruments under this section are linked with a requirement for a lock-in period.
"Premature withdrawal can lead to forfeiture of tax benefits claimed under Section 80C.
"The popular option of tax-saving fixed deposits comes with a lock-in period of five years, ELSS with three years, and PPF with 15 years."
Tax savings
Don't solely focus on tax-saving alone.
"Prioritise investments that align with your overall financial goals. Diversify your portfolio across different asset classes and factor in inflation to ensure long-term growth," says Ritika Nayyar, partner, Singhania & Co.
Pay attention to the taxability of returns on such investments.
Wadhwa says, "Understand the tax implications of the returns you earn before investing. For instance, interest income earned on fixed deposits is taxable, whereas interest income on Public Provident Fund (PPF) deposits is not taxable."
Health insurance
Taxpayers can claim deductions on premiums paid towards health insurance for themselves, family members, and dependent parents.
"This reduces their taxable income, thereby lowering their overall tax liability.
"Section 80D allows deductions with respect to the amount paid for the health insurance policy, preventive health check-ups, contributions to CGHS, and expenditures on medical treatment," says Razvi.
A maximum of Rs 100,000 can be claimed as a deduction under this provision, depending upon the age of the insured.
Medical treatment
Medical expenses for senior citizens can be cited for saving tax.
"Where any expenditure is incurred on the medical treatment of a senior citizen who is not covered under any health insurance scheme, such expenditure is allowed as a deduction under this section," says Wadhwa.
The deduction is allowed to an individual in respect of medical expenditure incurred for himself, his spouse, dependent children, or his parents. The maximum deduction amount isRs 50,000 for medical expenditures.
Preventive health check-ups
Amount paid by a person for the preventive health check-up is allowed as a deduction, for herself, her spouse, dependent children, or her parents.
A deduction of Rs 5,000 can be claimed for the preventive health check-up of the above-mentioned persons. This deduction will be within the overall limit of Rs 25,000 or Rs 50,000, as the case may be.
Cash or not
The premium is not to be paid in cash.
"The tax benefit of exemption is available only if the premium is paid in any mode other than cash. However, this doesn't apply to preventive health check-ups," says Wadhwa.
First, assess your healthcare needs and select a health insurance plan with comprehensive coverage.
"Explore family floater plans for economical coverage options," says Singhania.
"Keep all receipts and documents related to the health insurance premium payments and preventive health check-ups to claim these deductions.
"Finally, don't forget that deduction under Sections 80C or 80D is available only if the taxpayer opts for the old tax regime," says Suhael Buttan, counsel, SKV Law Offices.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Ashish Narsale/Rediff.com
