Here's what you need to know to save taxes in 2017
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Here's what you need to know to save taxes in 2017

The tax saving season is here. Tax saving should be done throughout the year but many generally do it in the last two-three months. So, if you are planning tax savings for 2015/16, it will be helpful to know your options.

  • New Delhi,  January 5, 2017  
  • |  
  • UPDATED   11:42 IST
Here's what you need to know to save taxes in 2017

The tax saving season is here. Tax saving should be done throughout the year but many generally do it in the last two-three months. So, if you are planning tax savings for 2015/16, it will be helpful to know your options.

Investments against which you can claim tax deductions
All the following instruments are qualified for a deduction of up to Rs 1.5 lakh under Section 80C.

1)    Tax saving equity linked saving schemes: These are equity mutual funds which investment in stocks and related instruments. These funds have a lock-in period of three years. If you want to save tax as well as grow your money , tax saving mutual funds can a good option as equities have the potential of delivering inflation-beating returns.

2)    Tax-saving bank fixed deposits: These fixed deposits offer slightly lower return than normal bank deposits but have a lock-in of five years and the interest earned is completely taxable.

3)    Investments in Unit Linked Insurance Plans (ULIPs) : These are insurance plans which provide the benefit of investing in equities along with insurance.

4)    Contribution made towards Public Provident Fund (PPF): It is the small savings instrument in which you can invest as low as Rs 500 and as high as Rs 1.5 lakh. The rate of interest on PPF was reduced from 8.1 per cent to 8 per cent in October.

The interest rates on PPF like other small saving scheme depends on the  yield of government securities of same maturity. The lock-in is 15 years while partial withdrawal is possible after seven years under certain conditions. The investment, the gains as well as the withdrawals are completely tax-free.

5)    Investment done in National Payment System (NPS): Contribution of up  to Rs 1.5 lakh are allowed under Section 80C. While an additional contribution of Rs 50,000 is allowed under  Section 80CCD (1B). So in total you can claim a deduction of  up to Rs 2 lakh for your  investments made to NPS in a year.

6)    Sukanya Sumriddhi Scheme: Under this scheme, if you invest in the name of your girl child aged below 10 years , you can claim a deduction of up to Rs 1.5 lakh under section 80C. You can open an account under the scheme for up to two girl children - in case of twins it can be extended to the third child as well. The account will be closed after 21 years while premature closure is allowed after 18 years under certain conditions. Currently, the interest rate under this scheme is 8.5 per cent and it is subject to revision  on a quarterly basis.

7)    Employees Provident Fund : The monthly deduction made from your salary towards your provident fund is also eligible for deduction under Section 80C.
                                                       
Payment against which you can claim deduction
1)    Home loan principal payment: If you have a home loan running , you can claim a deduction against the principal repayment under Section 80C. This means, you can claim up to Rs 1.50 lakh against this.

2)    Interest on home loan: You are eligible for a deduction up to Rs 2 lakh for the interest on home loan paid under Section 24 in case of self occupied house. While for the second house you can claim the entire amount of interest paid as deduction.

3)    Payment of life Insurance premium: This also qualifies for deduction under Section 80C of up to Rs 1.5 lakh. Insurer premium paid for not just Life Insurance Corporation of India but all private insurance companies is eligible for deduction.             

4)    Payment of health insurance premium: You can claim a deduction of up to Rs 25,000 against the health insurance premium paid for yourself, spouse and children.

5)    Payment of Tution fee: You can claim a deduction of up to Rs 1.5 lakh against the tuition fees paid for the admission in school college or university.

6)    Leave Travel Allowance (LTA) : If LTA is a part of your salary, you can actually claim a tax deduction on the expenses to cover the cost of travel. Food, hotel accommodation expenses not included in this.

7)    House Rent Allowance (HRA): If you are staying in a rented accommodation, you can claim a tax deduction against the rent paid if HRA is a part of your salary.

The minimum of the three can be claimed as HRA
a) Actual HRA received from the employer
b) Actual rent paid minus 10 per cent of your basic salary
c) 50 per cent of the basic salary if you live in a metro or 40 per cent of your basic salary if you live in a non-metro.