Tax Planning can be understood as the activity undertaken by the assesse to reduce the tax liability by making optimum use of all permissible allowances, deductions, concessions, exemptions, rebates, exclusions and so forth, available under the statute.
Think Beyond Section 80 (C)
An investor can save on taxes by investing under the following section of the Income Tax Act, 1961
||Quick Description of Deduction
||Key investment instruments eligible for deduction under this Section include – Equity Linked Savings Scheme (ELSS) , Public Provident Fund (PPF), EPF (Employee Provident Fund), NSC (National Saving Certificate), Senior Citizen Savings Scheme (SCSS), 5-year tax saving bank fixed deposits, 5-year Post Office Time Deposit (POTD), premium paid for life insurance plans, housing loan principal repayment, etc.
||Contribution to Pension Fund of Life Insurance Corporation or any other insurer referred in section 10(23AAB).
||Contribution to Pension Scheme (National Pension Scheme) notified by Central Government. Additional deduction of up to Rs.50,000 is allowed for contribution towards NPS which is over and above the limit of Rs 1.5 lakh under section 80 CCD(1B).
||Rajiv Gandhi Equity Savings Scheme (RGESS)
||Premium paid for medical insurance
||Maintenance including medical treatment of a handicapped dependent who is a person with disability
||Expenditure incurred in respect of medical treatment
||Interest on loan taken for pursuing higher education
||Donations to certain funds and charitable institutions
||Rent paid in respect of property occupied for residential use
||Certain donations for scientific research or rural development
||Contribution made to any political parties or electoral trust
||Deduction in respect of interest earned on savings bank deposits
||Person suffering from specified disability.
||Section 10(10D) of Income Tax exempts any income received from an Insurance Policy from Income Tax. This benefits policies such as Endowment Plans, Whole-life Plans and Unit Linked Plans, all of whose returns and bonuses become tax-free.