When you start earning at a young age, you do not have many dependencies. Such an advantage can work in your favor only if you begin investing your money smartly. As a young earner, you can invest larger amounts without stressing about commitments. So before obligations and duties take you down, here are some income tax savings tips you should heed before making any investment decisions.
5 Tips to Help You Save On Income Tax
1. Get a Savings Account
Parking your gains in a savings account can help you earn interest on it. This interest is eligible for income tax deduction under Section 80TTA with a maximum cap of INR 10,000. Thus, accumulating your savings will also give you perks and help save taxes.
2. Claim Interest on Education Loan
Education loan is a necessity with every student aspiring to study at an Ivy League and go abroad for further studies. Such plans demand you to get an education loan and fulfil those dreams. But there is no worry as you claim the interest collected on the loan amount for tax deductions under Section 80E. Now, you can dream high and apply to a good university.
3. Buy a Term Insurance Plan
A term life insurance plan is a perfect tool for investing your savings. It not only helps you get tax benefits but also aids in long-term savings. If you do not want to shell out much at the moment, you can opt for a term plan and get a pure life cover. But if your goal is wealth creation, you can opt for policies like a money-back plan, endowment policy or whole life plan. You can claim the premiums paid towards a policy under Section 80C of the Income Tax Act, 1961. Also, the maturity benefit or the death benefit can be claimed for under Section 10(10D) to avail it as tax-free.
4. Purchase a Health Insurance
Health insurance plan secures you from medical emergencies by covering the expenses. Be it a treatment for an ailment or a pregnancy, all of the cost can be covered by a health plan. Thus, along with saving taxes, you can secure yourself and your family. Under Section 80D, the premiums for the health plan can be claimed for deductions.
5. Consider Equity Linked Saving Schemes
Equity Linked Saving Schemes (ELSS) are mutual fund investment schemes that enable you to save taxes at the same time. It has a lock-in period of 3 years with a larger part of the funds being invested in equity. By investing in ELSS, you can gain lucrative returns and claim the investments made towards it under Section 80C.