How to Save Tax Efficiently?

At the end of every financial year, people pay taxes to the government. A tax is a financial charge levied on a product, income, or activity. Tax paid by the citizen is used by the government for infrastructure development. The government also provides provisions for savings, using which; one can reduce their tax liability. For this, proper tax planning is needed. One can make various investments in various avenues and obtain tax benefits.

The Section 80C of this act is one such section that provides with various tools to obtain tax rebate. The Indian government lists various deductions that are eligible for tax exemption. The Income Tax Act has various sections that deal with tax deductions that a person is eligible to pay. These deductions include various saving and investment options which an individual can make to avail tax benefits.

These various schemes are referred to as Tax Saving Schemes. The various tools that are available for tax deductions approved are listed below:

Life Insurance: Life insurance is the best tool that is used for saving tax. In this, a premium amount is to be paid to the insurer after a specified interval. The amount is paid as premium is eligible for tax deduction.

Public Provident Fund: It is the most effective and popular method of tax planning. It provides high returns in terms of interest rates. The minimum amount that can be placed in a PF account is Rs. 500 and maximum amount is Rs 1, 00,000 and the interest rate is 8% per annum.

Mutual Funds: Professional managers often invest in pools of assets referred to as mutual funds. These are either in general investments or in a particular sector. Some of these may pay dividends but, may assign all or a part of these as Capital Gains dividends so as to reflect them as capital gains earned by the mutual funds.

Tuition Fees: The tuition fees paid by an individual towards full time education including pre-nursery, play-school activities and nursery classes, paid to an university, school or college of any two children of an individual.

Not only this, there is the Senior Citizen Scheme, National Saving Certificate Scheme, Deposits made in Post Offices for a period of 5 years or more, investing in infrastructure bonds and so on. All these above given procedures and many more help you to save tax efficiently. One can obtain more information online and avail the best one which suits them or compare them to make an informed choice.