Income Tax Savings - A Checklist

January for most of us is an "eye opening" month. The month that wakes up to the one of the most hated realities of our finances - "Income-Tax". We keep running for compiling all the data and documents that needs to be submitted to accounts dept of our respective companies to reduce our tax-ability . But a more prudent approach to TAX rather Tax Saving should start at the beginning of the Financial Year itself. Initial stage involves understanding the available Tax Saving options and then planning your investments and moneyflow in a manner that facilitates maximum tax saving or should we say minimum tax outflow.To cite an example, if you want to invest in Mutual Funds, investing in Equity linked Service Schemes will help you in reduction of Taxable Income in addition to all the benefits of investing in Mutual Funds. 

Here is a small checklist for reference before you start compiling documents to be submitted to your accounts department

1. Section 80 (CCE) – “The Versatile”
 Arguably the most popular instrument,it can reduce taxable income by upto 1.5Lakh per          annum by  investing in the following instruments -
    Employee Provident Fund (self contribution)
    Public Provident Fund (PPF)
    Home Loan Principal amount
    National Saving Certificate (NSC)
    Tax Saving Fixed Deposits (FDs)
    Life Insurance Premium and Unit Linked Insurance Plans
    Equity linked Service Schemes (ELSS)

2. 80 CCC – Contribution towards notified Pension Schemes
3. 80 CCD - Contribution towards National Pension Scheme
4. 80 (D) – The ‘Healthy’ Tax Saving
                 Limit – Rs. 40 thousands
                 Instruments available –
                 Medical insurance (self and dependent family members and parents )
                 Medical Check up (self and dependent family members and parents )
5. 80 DD – ‘Charity begins at home Part-1 ‘
                 Limit – Rs. 1 lakh
                 Instruments – Medical expenditure on dependents with partial or severe disability
6. 80 DDB – ‘Charity begins at home Part-2 ‘
                 Limit – Rs. 60 thousands
                 Instruments – Medical expenditure on dependents with notified diseases
7. 80 E – ‘Education with Tax Saving ‘
                 Limit – None
                 Instruments - Interest paid on Education Loan
8. 80 EE – ‘My first Home’
                 Limit – Rs 1 lakhs
                 Instruments – Interest paid on loan for first time home buyer
9. 80 U – ‘ Enability Tax Saving ‘
                 Limit – Rs 1 lakh
                 Instrument – Medical expenditure
In addition to above mentioned instruments, tools like Hindu Undivided Family (HUF) can also be put into use for more efficient and effective Tax Saving. But more on it in coming articles.