Tax Saving Strategies For Indian Millennials: What You Need To Know And How To Make The Most Of It
As a millennial in India, it is important to make the most of your money. Tax saving strategies can be a great way to maximize your income and keep more of your hard-earned money in your pocket. In this article, we’ll be discussing the different tax saving strategies available for Indian millennials, providing guidance on how to make the most of them.
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Introduction to Tax Saving Strategies for Indian Millennials
When it comes to taxes, Indian millennials have a lot to learn. With the ever-changing tax laws and the complex tax structure in India, it is no wonder that many millennials are clueless about how to save on taxes.
However, with a little bit of effort and some smart tax planning, Indian millennials can easily save a lot on their taxes. Here are some tips and tricks on how to save on taxes as an Indian millennial:
1. Invest in ELSS mutual funds: Equity-linked saving schemes or ELSS mutual funds are one of the best investment options for Indian millennials looking to save on taxes. These funds offer a tax deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act and are also relatively high return-generating investment instruments.
2. Make use of the Sukanya Samriddhi Yojana: The Sukanya Samriddhi Yojana is a great scheme for parents who want to save for their daughter’s future education and marriage expenses. Under this scheme, parents can open a Sukanya Samriddhi account in the name of their daughter and get a deduction of up to Rs 1.5 lakhs per year from their taxable income. Moreover, the interest earned on this account is also exempt from taxation.
3. Save on health insurance premiums: Health insurance is another important aspect where Indian millennials can save on taxes. Under Section 80D of the Income Tax Act
Types of Tax Savings Schemes in India
India offers a variety of tax-saving schemes for its citizens. The most common and popular ones are:
1. Section 80C of the Income Tax Act: This section provides for a deduction of up to Rs 1.5 lakh from your taxable income, if you invest in certain specified instruments like PPF, ELSS, NPS, 5-year bank fixed deposits, etc. This deduction is available for both individuals and Hindu Undivided Families (HUFs).
2. Section 80CCD: This section provides an additional deduction of up to Rs 50,000 for investment in the National Pension Scheme (NPS). This deduction is over and above the deduction under Section 80C and is available only to individuals (not HUFs).
3. Section 24: This section allows a deduction of up to Rs 2 lakh from your taxable income for interest paid on housing loan. This deduction is available only to individuals (not HUFs).
4. Capital Gain Exemption: Long-term capital gains on sale of equity shares or equity mutual fund units held for more than 12 months are exempt from tax. Short-term capital gains on sale of equity shares or equity mutual fund units held for less than 12 months are taxed at 15%.
5. Dividend Distribution Tax: Dividends received from domestic companies are exempt from tax in the hands of the shareholders. However, a dividend distribution tax at the rate of 15% is levied
Eligibility Criteria for Different Tax Saving Plans
There are a number of tax saving plans available for Indian taxpayers, and the eligibility criteria for each can vary. Here is a rundown of some of the most popular tax saving plans, and what you need to know in order to take advantage of them:
1. Section 80C of the Income Tax Act: This section provides for a deduction of up to Rs. 1.5 lakhs on certain specified investments or expenses. These include investments in PPF, NSC, life insurance premiums, ELSS mutual funds, etc. To be eligible for this deduction, the investment or expenditure must be made during the financial year.
2. Section 80CCD: This section provides an additional deduction of up to Rs. 50,000 for investment in notified pension schemes such as NPS (National Pension Scheme). This deduction is over and above the limit of Rs. 1.5 lakhs under Section 80C.
3. Section 80D: This section provides for deduction on premium paid towards health insurance policy for self, spouse and dependent children. The maximum deduction allowed is Rs. 25,000 (Rs. 30,000 if senior citizen). An additional deduction of up to Rs 5,000 is allowed for preventive health check-ups.
4. House Rent Allowance (HRA): If you are paying rent for your accommodation and are not getting any HRA from your employer, you can claim a deduction under this head up to a maximum of Rs 60,
Benefits of Investing in Tax Saving Plans
There are several benefits of investing in tax saving plans for Indian millennials. Firstly, it helps to reduce the overall tax burden. Secondly, it provides an opportunity to save for the long term. Thirdly, it gives the flexibility to choose from a variety of investment options. Lastly, it helps to keep the financial goals on track.
How To Make The Most Of Tax Savings Schemes?
When it comes to taxes, there are a lot of different strategies that you can use to save money. Some of these strategies may be more effective than others, depending on your individual circumstances. However, if you’re looking for ways to save on taxes, here are a few tips to help you get started:
1. Make the most of tax-saving schemes: There are a number of tax-saving schemes available in India, such as the Public Provident Fund (PPF), National Savings Certificate (NSC), and Equity-Linked Saving Scheme (ELSS). If you’re not familiar with these schemes, consult with a financial advisor to see if they could help you save on taxes.
2. Invest in tax-friendly products: Another way to save on taxes is to invest in products that offer tax benefits. For example, certain life insurance policies and health insurance plans offer tax breaks. Similarly, you can also invest in mutual funds that have a special focus on capital gains taxation.
3. Use deductions and exemptions wisely: Deductions and exemptions can help reduce your taxable income, thus saving you money on taxes. Be sure to take advantage of all the deductions and exemptions that you’re entitled to, such as those for home loan interest payments, medical expenses, and charitable donations.
4. Stay updated on changes in taxation laws: The taxation landscape is constantly changing, so it’s important to stay up-to-date on any new developments
Tips and Tricks For Maximizing Tax Savings
1. Invest in tax-saving instruments: Invest in instruments such as Equity-Linked Saving Schemes (ELSS) and Public Provident Fund (PPF) to save taxes.
2. Use the 80C deduction limit judiciously: You can claim a deduction of up to INR 1.5 lakhs under Section 80C of the Income Tax Act. Make sure you use this limit judiciously by investing in a mix of instruments such as PPF, ELSS, life insurance, etc.
3. Maximize your HRA exemption: If you’re renting out a house, you can claim a deduction for the rent paid under the House Rent Allowance (HRA) exemption. The maximum amount that can be claimed depends on the city you live in.
4. Save taxes on interest earned: Interest earned on savings account deposits and fixed deposits is taxable. However, you can save taxes by investing in tax-saving fixed deposits or by opting for the new Sukanya Samriddhi Yojana scheme.
5. Get health insurance: Health insurance premiums are exempt from tax under Section 80D of the Income Tax Act. This deduction is available for self, spouse and dependent children. You can also avail an additional deduction of up to INR 5,000 for preventive health check-ups.
Conclusion
We hope that this article has provided you with the necessary information on how to save taxes as an Indian Millennial. Tax-saving strategies are essential for reducing your financial burden and taking advantage of all the available tax benefits. We recommend that you make use of these tips and understand how they work in order to get maximum returns out of them. Don’t forget, planning ahead can help you save a lot more money in the long run!