We enlist some investment ideas which will serve the dual purpose of investing as well as saving taxes
06-Mar-2018 •Research Desk
Calculating income tax
For most of us, it is the accountant at our office who tells us how much we need to invest to save income tax. If you want to know your taxable income, you need to first take a sum of your income from all sources.
Many of us have just one source of income - salary. But others can have multiple sources like income from property or business or capital gains, etc. Overall, there are five such categories:
Once you have combined income from all sources, you arrive at your gross taxable income. From the gross taxable income, you deduct your tax saving investments. These fall under many categories, as described subsequently. You need to deduct these investments and expenses from your gross taxable income. What you are left with now is your taxable income. Check the tax slabs to know how much tax you need to pay.
Understanding Section 80C
When it comes to tax planning, Section 80C is the most important. But what is it? Section 80C is a section in the Income Tax Act which mentions tax saving avenues. Currently, one can invest up to Rs 1.5 lakh in the instruments mentioned in Section 80C. Keep an eye on the upcoming budget for any changes in this limit.
Section 80C consists of many avenues: Public Provident Fund, National Savings Certificate, fixed deposits and so on. The Sukanya Samriddhi Yojana is meant specially for the girl child. Investments made towards the National Pension System (NPS) also come under this section.
The table below lists the various tax saving avenues available under Section 80C, along with their specifications. Most of us also have provident fund deductions. These deductions (not the employer's contribution) are also included in Section 80C. Do take them into account when you calculate your investment amount. For instance, if you have made a provident fund contribution of Rs 50,000, you need to make investment of only Rs 1 lakh towards Section 80C.