Use these tips to save more tax before March 31, 2020

Tax payments can be an essential part of your financial planning. After you start earning, tax payment can be inevitable. While many of you might file your taxes, the rest of you might delay the tax payment until the last minute. The key to successful tax planning can be to start it as soon as possible. When you start early, you might be able to save more money, which in turn can reduce your tax burden in the future.

Before you begin tax planning, let’s go through the top five tips mentioned below to save more tax before you near March 31, 2020:

  1. Look for tax-saving investment options

The easiest way to reduce your tax liability is by buying tax-saving investment plans from the market. Different tax-saving investments can allow you to claim deductions and save more money. Typically, you should look for tax-saving investment options such as Provident Fund, Unit Linked Insurance Plan (ULIP), Equity Linked Savings Scheme (ELSS), and so forth that fall under Section 80C of the Income Tax Act, 1961. Moreover, there are other investment tools such as health insurance, National Pension Scheme, etc. that come under Section 80D and 80CCD, respectively.

  1. Book Long Term Capital Gains Tax (LTGC) on equity

Another way to save more on taxes is my booking your equity investments under LTCG. If the LTCG on your equity investments go beyond Rs.

1,00,000 in a financial year, the amount can be subject to a 10% income tax. Hence, book LTCG every year in a way that your gains should not increase the taxable limit. In case your total amount does not exceed, you can easily repurchase the shares or mutual fund units on the following next day. If a significant proportion of your investment portfolio is diverted towards equity investment, you can save at least 10% of LTCG tax.

  1. Borrow home loans this financial year

Many of you might aspire to buy a new house, but might be unable to do so due to inadequate funds. However, if you want to fulfil your lifelong dream of purchasing a new house, you should borrow a home loan before March 2020. When you take a home loan before March 2020, you can avail tax deductions under Section 80EEA. Under Section 80EEA, you can have the liberty to claim a deduction up to Rs. 1,50,000 for the payment of interest on the loan. However, the 80EEA tax benefits can be claimed only if the amount exceeds up to Rs. 2,00,000 in accordance with Section 24 for the repayment of loan interest. Moreover, see to it that you do not own any other residential property while claiming a deduction under Section 80EEA.

  1. Opt-out of long-term payment commitments

The most crucial tip to ensure that you save taxes is that you should avoid investment plans that might require long-term commitments. For instance, you might choose traditional investment options at the very last minute with the primary aim of saving taxes. When you select a long-term investment plan, you might not be able to discontinue it after a few years. Therefore, research the right tax-saving investment plan that can fulfil your short-term goals as well as allow you to save taxes at the same time. Do not choose a long-term payment option until and unless you have long-term goals such as planning your child’s dream wedding, fulfilling your post-retirement needs, and so forth.

  1. Claim medical expenses for your aged parents

Purchasing a health insurance plan for your parents, who are above 60 years can be expensive. Typically, you can buy a health plan under Section 80D if your parents are aged. According to Section 80D of the Income Tax Act, 1961, you can claim a deduction up to Rs. 50,000 for the payment of medical expenses of your aged parents. In order to claim a deduction for your parents, you should document all the medical invoices carefully with you.

As highlighted above, there is no denying that tax payments are an imperative part of your financial planning. Therefore, look for the right type of investment that can allow you to reduce your tax burden as well as allow you to save more money.