5 min read
Updated on Jul 13, 2022
Did you opt for the old tax system for the 2021-22 fiscal? In that case, you do not have more than 31st March 2022 to complete your expenses and investments that would help you save money on taxes. If you want you can also go with the new concessional tax regime where the rates would be lower but you would not get the tax exemptions and deductions that you normally get in the existing system.
Also Read: Section 139 (1) of the Income Tax Act
When you think of investments to reduce income tax that can be done online the first name that comes to mind is that of the five-year tax-saving fixed deposits. This is primarily because of how hassle-free these fixed deposits happen to be. Do you have a KYC (know your customer) compliant bank account with internet banking facilities? In that case, you can easily invest in these. All you would have to do in this case is log on to your internet banking account and carry out the transactions from over there. However, when you are making such an investment, be careful to avoid the option of auto-renewal.
This is because that way the fixed deposit would get renewed for another five years. However, if you want to do so you should choose the option of auto-renewal. There is no doubt that these are perhaps the best tax deductible investments because of the kind of money that you can make from them. If you renew them automatically you would be benefitted from the power of compounding and that would provide you with a huge corpus at the time you finally decide to liquidate the fixed deposit. However, please remember that in these FDs (fixed deposits) premature renewal is not allowed.
The term life insurance plans are among the best options you have for tax deductible investments. Just about anyone can buy these policies online these days. However, getting approved for such a policy can prove to be a bit tricky because you may have to undergo physical tests before the policy gets issued to you. Also, you need to make sure that the policy is issued to you before 31st March 2022. Otherwise, you would not be able to claim any tax benefit for it in the 2021-22 fiscal.
The ULIPs (unit-linked insurance plans) are also a viable option in the context of this particular discussion. However, whether you go for them or not depends on the types of tax planning that you are following for a particular year. You can visit the website of an insurer and buy such a policy from over there. Since there is no intermediary involved in such a transaction there is no question of any commission being paid to an agent! The entire process of making payments and application would be done online.
PPF (Public Provident Fund) is among the major tax saving investments of India. However, in case you are planning to invest in them as a way to save money you should do so as soon as possible. This is because the process of opening one in a designated bank could end up consuming a couple of days at the very least. Here you would only be able to fill up the form online by accessing your net banking account. You would then need to take a printout of the form and submit it at the bank branch – along with other documents – for verification.
You can also consider the repayment and prepayment of home loans as investments to reduce income tax. There are two kinds of tax benefits that you can gain when you have a continuing home loan. You get an income tax deduction on the repayment of the principal of the home loan from Section 80C of the Income Tax Act, 1961. The maximum tax exemption that you can get in this case is 1.5 lakh rupees a year. Section 24 provides you a maximum tax deduction of two lakh rupees on the interest that you are paying for the home loan.
Health insurance plans are regarded as one of the best tax deductible investments that you get in India. Thanks to the effects that the Coronavirus pandemic has had on our lives people now have a greater awareness of how important it is to have a health insurance plan! These days, it has become so easy to buy these policies because there are so many avenues to do so. You can visit a policy aggregator site or the official website of an insurer itself and buy these policies.
The ELSS (equity-linked savings scheme) mutual funds are among the finest tax saving investments. One of the best things about these funds is that they have the shortest lock-in period of all – just three years! This is why a lot of investors prefer them to the likes of PPF, tax-saving FDs, and EPF (Employee Provident Fund), to name a few. You can easily invest in them online by visiting the websites of the fund houses as well as the aggregator portals. However, you need to provide your KYC documents in these cases as well.
Also Read: How Section 80C Of The Income Tax Act Works
When you are purchasing the investments to reduce income tax there are a few things that you have to keep in mind. Make sure that the transaction has been done successfully and that you have received the confirmation of the same. If you are unable to complete the transaction for some reason or the other, and if you do not attempt to do it again you may miss a golden opportunity to save some money on your income taxes for the 2021-22 fiscal. This would mean that you may have to spend more money on paying income taxes than you intended to.
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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