The Income Tax Act (ITA) allows several deductions that help you reduce your tax outgo. With careful financial planning, you can avoid paying a considerable amount as income tax. Otherwise, arranging for a large sum for taxes at the end of every financial year can dent your savings. To help you plan well, here are five of the best ways to save income tax in 2020.
How to save income tax in 2020?
1. Save for your retirement.
Invest in pension plans and avail rebates under Section 80C of the ITA. Contributions up to ₹1.5 lakhs are deductible from your taxable income. Some of the options include:
Annuity plans - replaces your regular paycheck and provides a steady income for life
Public Provident Fund - offers stable returns and the interest, as well as the payout at maturity, are also tax-exempt
2. Venture into the capital market
The capital market offers a high return potential and lets you save income tax as well. Some of the profitable avenues include:
Unit-Linked Insurance Plans (ULIPs): Clubbing life insurance with investment options, ULIP helps you create funds for your long-term life goals. The premiums are eligible for tax benefits under Section 80C. Also, using the fund switch facility, you can ride out market fluctuations by switching over to conservative assets during downturns. And change back to equities when the market recovers, gaining inflation-beating profits.
Equity Linked Savings Schemes (ELSS): Offering professional fund management, these mutual fund schemes help you gain from the stock market. You can also save tax on your invested sum under 80C. Also, if you earn less than ₹1 lakh in a year, you don’t have to pay any taxes.
3. Invest in residential property
If you want tax saving options other than 80C, a home loan can be useful:
Claim up to ₹2 lakhs on the interest amount under Section 24
As a first-time homebuyer, claim a further ₹50,000 under Section 80EE
This write-off is over and above the deductibles on the principal repayment under 80C.
4. Increase your professional skills
Upgrading your skills through an advanced academic course can help you increase your earnings. And if you opt for an education loan to pursue higher studies, you can also save income tax. Under Section 80E you can get discounts on the full amount you pay as interest for the loan.
5. Grow your money with fixed deposits (FDs)
Investments up to ₹1.5 lakhs in tax-saving deposit schemes bring deductions under Section 80C. Moreover, FDs offer fixed interest rates. Thus, the amount you receive at maturity is pre-specified. Hence, such FDs are ideal income tax saving options if you want to earn profits from risk-free platforms.
YES BANK’s Tax Saving Solutions
To invest in profitable income tax saving options, you can look into YES BANK’s range of tax solutions:
Life insurance products: Be it protection against contingencies, wealth creation through ULIPs, or saving for your child’s future, YES BANK meets every insurance and investment need
ELSS: Leverage the capital market through YES BANK’s hassle-free online investment platform MFOnline
Retirement plans: Get life cover and ensure financial freedom in your retirement with annuities and guaranteed lump-sum payouts
Health insurance: Protect your health from rising healthcare costs and claim deductions under Section 80D on the premiums
Loans: Avail home loans and education loans at attractive interest rates and enjoy prompt disbursals
Tax-saving FDs: Get attractive interest rates for higher earnings and secured returns
With YES BANK’s YES Tax Solutions, you can get all-round guidance on planning your Income Tax 2020. Buy the right tax-saving tools at discounted prices and use the tax benefits to your advantage.