How to Save Income Tax in FY 2024-25?

You work hard to secure the future of your loved ones, however, any unfortunate event can jeopardize their future. Buy a life insurance policy to give financial protection to your family that will take care of them in your absence. Also, the premiums paid on life insurance are tax-exempt upto Rs 1.50 lakh, as per Section 80C.

Further, there are various types of life insurance plans, like endowment plans, term insurance, etc. Then there are customized plans for your life stage needs such as a child insurance plan to secure the future of your child and curtail your tax outgo. So, irrespective of the type of plan you choose, the following tax benefits will be available:

• Insurance premium is tax-exempt up to Rs 1.5 lakh under Section 80C
• Insurance payout is eligible to be tax-exempt under Section 10(10D)

Equity Linked Savings Scheme or ELSS, serves the dual purpose - Tax Save + Wealth Creation. These are mutual funds that primarily invest in equities and help in meeting long-term goals, like a child’s education, marriage, etc. In terms of taxation, ELSS comes under the EEE category. It means, it is not just the investment amount, even dividend income and maturity proceedings are tax-exempt.

Then there are Unit-Linked Insurance Plans (ULIPs), which are a reliable wealth creation solution over the long run, keeping in mind the returns, protection and tax benefits available with them. The premium amount is invested in a mix of equity and debt funds in a different proposition, allowing inter-fund transfer through switches, which is also tax-exempt. Further, the tax benefit is available on ULIP payout along with the premium.

A single hospitalization is enough to disturb your monthly budget, so health insurance policy and get protection from rising medical costs. As per Section 80D, premiums paid towards health insurance bought for self, spouse, and dependent kids get a tax deduction up to Rs 25,000. By paying the premium towards the policies of your senior citizen's parents, you can get a tax deduction up to Rs 30,000. This tax limit includes the expenses of Rs 5,000 paid towards preventive health checkups.

A quick look at the tax benefits available on health insurance policies:

Under Section 80E, the interests paid towards the loan taken for higher education are tax-exempt. The tax benefit is offered for a maximum of eight years or till the time; the interest has been completely paid, whichever is earlier.

Under Section 80EEA, tax benefits are available for first time home buyers. The maximum deduction is up to Rs 1,50,000 p.a. on interest which can be availed, provided the following conditions are fulfilled:

• The said property should be the only one property in the individual's name
• The house value must be below Rs 45 lakh

Under Section 80EEB, tax benefit are is available on interest payable on loan taken for the purpose of purchase of an electric vehicle. The maximum deduction is up to Rs 1,50,000 p.a. on interest.

Your best way to save on taxes is to ensure that you continue to make investments throughout the year which are supported by a well-analyzed plan. Otherwise, you might not be able to take all the advantages that you could.

However, never purchase any insurance or investment product just to save tax. It is fine to pay tax in case you don’t find the right investment product, but never invest just to save taxes!

Disclaimer: Tax benefits are in accordance to prevailing provisions of section and subject to fulfillment of conditions mentioned therein. Policyholders are advised to seek tax consultants view for more clarity.