Business & Finance

Best Tax Saving Investments

Author: Rajat Gupta, CA

Why is Tax Saving Important?

As your income grows, liabilities are also increased in the form of taxes and people look for tax saving options. They find the investment opportunities where they can earn return and save their taxes by investing their money. So, here we have come with most useful tax saving options for you. 

Best Tax Saving Investment Tips – For Doctors

Let’s discuss how you can save your tax by planning your investment opportunities better. Here are the best tax saving investment ideas for you:

Invest in Property and Save Taxes

Whenever anyone think about tax saving, first thing that comes to mind is Invest in Property. You save heavy amount of your tax bill by investing in property and taking loan on it. See below are the tax benefits you avail by taking a loan on the house property:

  • You will get deduction up to Rs. 1,50,000 p.a. under section 80C on the principal amount of loan paid  
  • You will get deduction up to Rs. 2,00,000 p.a. under section 24b on the interest amount of loan 
  •  Further, deduction for interest is available up to Rs. 1,50,000 p.a. under section 80EEA on the interest amount of the loan. But there are certain conditions to avail this benefit which are as follows:
  • Loan must be sanctioned in the period starting April 1, 2019 and ending on March 31, 2021
  • Stamp duty value of the house must not exceed 45 lakhs
  • You must not have any house on the date of sanction of the loan

Considering above, if you satisfy all 3 requirements of 80EEA than you will get a total deduction of Rs. 5,00,000 p.a. Otherwise you will get the deduction of Rs. 3,50,000 p.a.

Tax Saved: Rs. 1,50,000 (if you come under 30% tax bracket and satisfy all 3 requirements of 80EEA). 

Rs. 1,05,000 (if you come under 30% tax bracket and not satisfy all requirements of 80EEA).

Section 80C (Deduction Maximum Rs. 1,50,000) 

It is the most used section where maximum deduction available is of Rs. 1,50,000. Section 80C basically covers certain investments and the most common things which people use 80C are listed below:

  • Loan principal repayment taken for house property
  • Tuition fees for a maximum of 2 children
  • LIC premium paid for you, spouse and children
  • Investment in equity mutual fund
  • Stamp duty paid on purchase of house
  • Employee contribution of Provident Fund
  • Employee contribution of Superannuation Fund
  • 5 year time deposit in Post Office

There are other things also available under section 80C but above mentioned are the most used.

Tax Saved: Rs. 45,000 considering 30% tax bracket

Purchase of Electric Vehicle (Deduction Maximum Rs. 1,50,000)

Government is focusing more on Electric Vehicles and for this they brought in section 80EEB under Income Tax. As per this, if you have taken a loan on purchase of electric vehicle than you will the deduction up to Rs. 1,50,000 p.a. on the interest portion of loan but the loan must be sanctioned between April 1, 2019 to March 31, 2023.

Tax Saved: Rs. 45,000 considering 30% tax bracket 

Medical Insurance Premium (Deduction Maximum Rs. 50,000)

If you have taken medical insurance for you, your spouse and children than you can avail a total deduction of Rs. 25,000 p.a. for medical insurance premium paid. Likewise, for your parents also, you will get a deduction of Rs. 25,000 p.a. for medical insurance premium paid. In totality, you will get deduction up to Rs. 50,000 p.a.

Tax Saved: Rs. 15,000 considering 30% tax bracket

National Pension Scheme (NPS)

Depositing your funds in NPS, doctors can secure their post-retirement period very efficiently. You can annually invest in NPS plan and when you turned 60, you can withdraw 40% of the total corpus as lump-sum and remaining 60% will be converted into annual pension amount which you can choose for 5 years, 10 years, 15 years as per your choice. Once you invest the money into NPS, annual interest is taxable on that, but you get the tax deduction for amount you invested. 

Returns: Around 8-10% p.a.

Tax Saving: Investment is allowed for Rs. 0.5 lakhs under 80CCD(1B). So, you can save tax of Rs. 15,000 (considering 30% tax bracket) by investing into it.

Deduction on Amount Incurred on Medical Treatment (80DD)

If you have incurred any expenditure on the medical treatment of a dependent with disability than you will get the deduction to the extent of lower of Rs. 75,000 or expenses incurred. However, if such dependent is severely disabled (i.e. more than 80% disabled) that the amount of deduction will be lower of Rs. 1,00,000 or expenses incurred. This certificate of disabled or severely disabled can be taken from the medical institute.

Tax Saved: Rs. 22,500 for disabled and Rs. 30,000 for severely disabled

Interest on Loan taken for Higher Education (80E)

If you have taken a loan for higher education for self and relative than you can avail deduction for the interest portion of the loan paid. Here, there is no limit of the amount of deduction. However, you will get the deduction only for the 8 years starting from the year in which loan taken.

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