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Tax planning should not be a last minute exercise. However, it is always prudent to review and claim all possible tax deductions for the current financial year to save some of your hard-earned money.
The month of March is about to end and this could only mean one thing if you are a salaried professional – time to review your tax-saving options.
Even though the cut-off date to invest in tax-saving investments is just 3 working days away, there is just enough time to analyse the investment options . Remember, you can claim deduction up to Rs.1.5 lakh under Section 80C and up to Rs.25,000 (Rs.30,000 for senior citizens) under Section 80D. An additional deduction of Rs.30,000 is available under section 80D for health insurance premiums paid for your senior citizen parents. Let’s look at some of the ways in which you can reduce your taxable income and hence, your tax liability.
Under Section 80C, you can claim deductions by investing in different kinds of instruments. Clearly, time is a luxury you cannot afford at this time of the year. For those of you looking to make an immediate investment, life insurance is an option you must consider.
You can claim deductions for Life Insurance (LI) premiums paid for yourself, your spouse or your children – either dependent or independent. Tax deductions can be availed on the premium amount under section 80C, but only up to 10% of the sum assured.
Please note, you can claim deduction for the year in which the premium is paid and not for the year in which the premium was due. For example, if your premium is due before 31st March 2017, which is the last date of the financial year, but you pay the premium after that date, you will not be able to claim deduction for financial year 2016-17. Thus, paying your premium every year before the due date will not only help keep your policy active, it will also help you claim deductions within the same year.
Investment in life insurance is a win-win. Not only can you claim tax deductions for the annual premiums, the money that you will receive upon maturity of your life insurance policy is exempt from tax. So enjoy the safety net of a life cover as well as tax deductions while you continue paying your premiums.
Life insurance policies offer a number of customization options too. You can choose add-on covers for an existing policy to suit your changing needs. You can buy a critical illness cover that offers protection against heart and cancer ailments, making you eligible to claim deductions under Section 80D.
Section 80D allows deduction of up to Rs.25,000 for health or medical insurance premiums paid for yourself, your spouse, and dependent children. If you or your spouse are senior citizens, then this limit goes up to Rs.30,000
You can claim additional deductions of up to Rs.25,000 for premium paid for your parents’ health insurance too. This limit is Rs.30,000 if your parents are senior citizens. The limit also includes deductions of up to Rs.5,000 on expenses incurred on any preventive health check-ups you may have undergone, provided these were cashless transactions.
Ideally, investment planning should be done at the start of the year after carefully analysing and finalizing your financial goals. However, if you are one of those who prefer to wait it out until the very end, the time has come to make your choices. Remember, life insurance is not just about saving taxes. It is about securing the long life of your loved ones and attaining the most elusive thing in our stressful lives, peace of mind!