Your Top 5 Tax-Saving Options For 2018

By BankBazaar | January 10, 2018

Here are the top five tax-saving options for the financial year 2018. These options will also help you claim deductions for the current financial year.

Your Top 5 Tax-Saving Options For 2018

Let’s face it! No one really enjoys paying taxes and most people are compelled to pay taxes to avoid legal troubles. If you are tired of paying enormous amounts of money every year as taxes, you should take advantage of the Income Tax deductions provided by the Government of India. Under the sections 80C to 80U of the Income Tax (IT) Act of 1961, you can claim deductions for a variety of financial products and investment schemes available in the country. Section 80C of the IT Act facilitates tax deductions for individuals for an amount of up to Rs. 1.5 lakhs.

Here are the top five tax saving options for the financial year 2018 which will help you claim deductions for the current financial year: 

  1. Life Insurance – A Life Insurance policy can not only secure the future of your loved ones, but it can also help you claim tax deductions. You will need to apply for a Life Insurance policy from an insurer approved by the Insurance Regulatory and Development Authority of India (IRDAI) to get this benefit. The tax benefits are offered under Section 80C of the IT Act for the premiums paid for plans like a term plan, an endowment plan, a unit-linked plan (ULIP), a money-back plan and so on. You can claim deductions of up to a maximum amount of Rs 1.5 lacs (current financial year) for premiums paid for a Life Insurance policy.
Additional reading: 9 Vitally Important Things You Must Know About Paying Life Insurance Premium
  1. Medical Insurance – Under section 80D of the Income Tax Act, you can claim deductions up to Rs. 25,000 for paying the premiums of a medical or Health Insurance policy for yourself, your spouse or children who are dependent on you. For the financial year 2017 – 2018, senior citizens can claim deductions of up to Rs 30,000 (under section 80D) for Medical Insurance. You can also claim additional deductions if you have paid the Medical Insurance premiums for your parents, even if they are under the age of 60. However, the total deductions that you can claim under this section cannot exceed Rs 30,000.
  2. Pension Plans – By opting for a pension plan, you will be able to save a substantial amount of money through tax deductions. Pension plans are offered by many IRDAI approved insurers in the country and these plans are similar to Life Insurance policies but are different from protection plans such as endowment plans and term plans. These plans are aimed at protecting the financial stability of the insured and they are also sometimes referred to as retirement plans. Under the subsection 80CCC of the IT Act, you can claim deductions up to Rs 1.5 lakhs for premiums paid for such pension plans. However, the total deductions that you claim under section 80C and its subsections cannot exceed Rs 1.5 lakhs.
Additional reading: Pension Plans And Their Tax Benefits
  1. Savings Schemes – In the current financial year, and most likely in the coming financial years, you can avail a decent amount of tax deductions by opting for various savings schemes offered by the Government of India such as the Sukanya Samriddhi Yojana, National Pension Scheme etc. The Sukanya Samriddhi Yojana is a savings scheme that was launched by the honourable Prime Minister of India in 2015. It is aimed at encouraging the parents of girl children in the country to save money for the education and marriage of their child. You will need to invest a minimum amount of Rs. 1,000 per year in an account opened under this scheme and you will be able to claim tax deductions under section 80C up to Rs. 1.5 lakhs.
Additional reading: Top 5 Savings Account Schemes For Women
  1. Education Loan – if you have taken an Education Loan for higher education in India, you can claim tax deductions under section 80E of the Income Tax Act for interest paid for the loan. You will be eligible for deductions under this section if the loan was taken for yourself, your spouse or your dependent child. However, this benefit does not apply to loans taken for education in a foreign country and if the lender is not gazetted by the Government of India.

Apart from the above, you can also claim tax deductions for donations made to a charitable organization and for other financial activities that are eligible for deductions per 80C to 80U of the Income Tax Act of 1961.

If you haven’t already made your investments for the year, don’t wait too long. The financial year is drawing to a close and all investments need to be made before 31st March 2018.

Additional reading: Tax exemptions for individuals

Need to make a few tax-saving investments? Why not start with ELSS Mutual Funds?

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