Income Tax Planning: From ELSS to NPS, expert suggests these 5-investment themes for saving tax

Income Tax Planning 2022: The new financial year has begun and many people have already started their tax planning while many are about to do it. 

If invested wisely, a lot of money can be saved through various avenues available for tax savings under the Income Tax rules.

Zee Business Web Team spoke with Expert Naveen Wadhwa, Deputy General Manager at Taxmann Publication, to know best tax-saving avenues.

Edited Excerpts:

Here are the 5 investment plans for tax-saving as suggested by Wadhwa:-

Equity Linked Saving Scheme (ELSS) 
“Amount invested by an individual in the Equity Linked Saving Scheme is eligible for deduction under Section 80C. Maximum deduction of Rs. 150,000 can be claimed under Section 80C,” Wadhwa said.

The investment in ELSS will have to be kept for a minimum period of 3 years from the date of allotment of units. The units under the plan can be transferred, pledged, or assigned after 3 years from the date of issue. Any profit arising from the transfer of units is taxable under the head of capital gains in excess of Rs. 1,00,000,” he added.

Health Insurance 
“An individual or HUF (resident or non-resident) can claim a deduction under section 80D when the assessee pays an amount for the health insurance policy, health check-up, or medical expenditure. Deduction under this provision shall be allowed only if payment is made by any mode, other than cash. However, payment made in cash for the preventive health check-up is allowed,” he explained. 

Term Plan
“The amount deposited or paid to effect or keep in force a life insurance policy (endowment or term insurance) is eligible for deduction under Section 80C. Maximum deduction of Rs. 150,000 can be claimed under Section 80C. The deduction is allowed to an individual for making a payment towards the life insurance policy for himself, his spouse, and any children (whether dependent or not). A HUF can claim a deduction for making payment of a life insurance premium for any family member,” the Expert said.

Unit Linked Insurance Policies (ULIP)
“Unit linked insurance plans (ULIPs) are investment options consisting of a mix of insurance and investment. An Individual can claim a deduction for the investment made in ULIP for himself, his spouse, or children (dependent or independent), and HUF can claim a deduction for the investment made for any member of HUF,” according to the Expert.

“The deduction is allowed under section 80C with respect to the premium paid on ULIP provided the premium paid during the year does not exceed 10% of the sum assured amount. ULIPs typically have a lock-in period of 5 years,” he added.

“The deduction is allowed under section 80C with respect to the premium paid on ULIP provided the premium paid during the year does not exceed 10% of the sum assured amount. ULIPs typically have a lock-in period of 5 years,” Wadhwa said.

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National Pension Scheme (NPS)

According to Wadhwa, “An individual is eligible to claim a deduction under section 80CCD for the amount contributed to the National Pension Scheme or Atal Pension Yojana. The total deduction under Section 80C, Section 80CCC, and Section 80CCD(1) [Contribution made by the employee to NPS account] shall be limited to Rs. 150,000. This limit of Rs. 1,50,000 is not applicable in respect of:

(a) The contribution made by the employer to the NPS account of the employee [Section 80CCD(2)]; and

(b) Additional deduction of Rs. 50,000 for the contribution made by an individual (employee or self-employed) to his NPS account [Section 80CCD(1B)].

However, any contribution by the Central Govt. employees to Tier-II NPS shall be allowed as a tax deduction under Section 80C. Such contribution should be made for a fixed period of at least 3 years.”

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)