Last Minute TAX Saving Tips before the Financial Year ENDS

taxesIt is end of the financial year – that means all clients expect some sensational tax saving plan from us even when we have done this exercise during plan review. No matter what income bracket one is in, tax saving always comes toward the end. If tax planning starts early, a lot can be done especially things like salary restructuring so that taxpayer end up paying lesser taxes. But let me not dampen your spirits any further; we do have some excellent tax saving tips even now. (But this year you should stick with basic things – may be new government can bring some drastic changes in taxation system)

Spent More than Save Some

Do submit following details to your employer or tax planner to save taxes on the expenses incurred during the course of the year.

  • Rent paid till March (for employees with HRA component)
  • House loan details including Interest and Principal
  • Tuition fees for maximum of two children
  • Loan on higher education including your spouse or children or any other child for whom you are guardian.
  • Unclaimed expenditures on treatment of certain diseases (taxpayer & dependents only)

Save, Invest and Donate to reduce Income Tax

Additionally you can invest for long term goals (never invest in Insurance), participate in saving schemes or donate for charity to save taxes. The following table indicates what can be done to save taxes further.

Investments -Section  80 C Applies to: Individual, Hindu Undivided Family (Non Resident Indians also)
Maximum deduction Allowed: 1 Lakh
Can Invest in

  •       Public provident funds, EPF, VPF
  •       5 Year Tax Saving FD
  •       Life insurance premiums (conditional),
  •       Pension funds,
  •       National savings certificate
  •       NPS or Senior Citizen Tax Saving Scheme
  •       Unit linked insurance policy (conditional)
  •       Equity Linked Saving Schemes (ELSS)
We like ELSS better, even though this is a risky/volatile investment – as these schemes invest heavily in equity or equity linked products. The beauty of the product lies in the fact that dividends received and long term capital gains(profits from sale of ELSS after one year) are non taxable.
Donations for social causes – Section 80 G Applies to: All taxpayers
Deductions Allowed : 100% or 50% with no upper limit
If you have always wanted to donate for various social causes, please do so to the government specified funds to save taxes.

Donation to Political Parties: “The entire amount donated by an individual to a recognised political party is allowed as deduction under Section 80GGC of the Income-Tax Act while computing her gross total income” Through cheque not cash 😉

Medical Insurance Benefit -Section 80 D Applies to: Resident Indians only
Maximum deduction Allowed: Rs 40000
  • Do not postpone your complete health checkup, as you can avail  deduction upto Rs 5000 for preventive health checkup. (this is not over & above health insurance)
  • You can avail deduction upto Rs15000 for health insurance of self, spouse and dependent children. This limit extends upto 20000 for insurance by senior citizens.
  • Gift your parents health insurance and you will be eligible for deduction upto RS 20000 additionally.  (In addition to priceless parents blessings)
Exemptions on Long term Capital Gains – Section 54 Applies to:  Individual (NRI’s also)
It is relevant only if you had an unusual gain in this financial year because of property or asset sale (residential property). The following exemptions apply only if asset is held for more than three years.
Do the following to save taxes on long term capital gains

  • Setoff against short term capital losses or long term capital losses if any.  (bad Investment already sold or that can be easily liquidated)
  • Direct these gains towards buying your first residential property in next two years by depositing in capital gains A/C scheme.
  • Deposit these gains in capital gains A/C scheme, if you have plans to invest capital gains from residential property in another residential property in next two years. or construction in next 3 years.
  • Invest the gains within 6 months of asset sale in National Highway Authority of India(NHAI) or Rural Electrification Corporation(REC) bonds(Max limit of 50 lakhs & lock in period of 3 years).
  • Read more about Sec 54 & 54F

Saving taxes is not the sole criteria for investments, savings and donations. Make a wise decision keeping your financial goals in mind.  Tried to keep the article simple as too many calculations may keep you away from tax saving.   Feel free to add your inputs and queries to our comments section. 

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{ 24 comments… add one }
  • Premal March 11, 2014, 12:24 PM

    Hi whats is your view on Tax free Bonds should you lock in the current interest rate for 10 – 15 yrs.

    • Vikas March 12, 2014, 11:06 PM

      Premal,

      They are good option considering the high interest rates they are offering. But do aware that in longer horizon reinvestment and inflation risk is present even here. These bonds are specifically suited if you have a regular income requirement.

    • If you have long term goals and do not wish to take any risk(Market)one should dfefenitly go for that

  • rakesh kumar jain March 11, 2014, 12:49 PM

    Can I avail health checkup exemption of Rs. 5000/- individually
    for myself & my wife i.e. total exemption of Rs. 10000/?

    • Ritesh March 11, 2014, 2:55 PM

      Yes.
      You can avail deduction upto Rs15000 for health insurance of self, spouse and dependent children. This limit extends upto 20000 for insurance by senior citizens.

      • rakesh kumar jain March 12, 2014, 10:29 AM

        Sorry to bother you once again. To clear the doubts, I am once again
        sending the query.

        My age is 63 years. So, I can avail total limit of Rs. 20000/- for myself
        & my wife together (children are independent & avail their own limits). This
        Rs. 20000/- must include Insurances & Medical checkups or Medical
        checkups have separate limit of Rs. 5000/? Best regards, RAKESH

        • Vikas March 12, 2014, 11:12 PM

          Rakesh,

          Medical checkups exemption of Rs 5000 is under Sec 80D within limit of Rs 15000. This means that including health insurance premiums, you can claim max upto Rs 15000.

  • kamal anand March 11, 2014, 2:13 PM

    Hi,
    Last Minute TAX Saving Tips before the Financial Year ENDS is the most awaited picture for everyone, your view on tax saving is very good.
    Pls tell me who is the best family floter health insaurance upto 5-10lacs cover money and which company plan is best for our full family.

    I`am waiting your comments.

    Regards
    Kamal Anand

    • Vikas March 30, 2014, 9:24 PM

      Kamal,

      You need to decide on your requirements in a health insurance products i.e. what are the benefits or type of coverage you desire to have. Then you can evaluate products with features matching your requirement.

      You can look at Apollo Munich or Max Bhupa which do not have sublimits.

  • Jayanth March 11, 2014, 3:41 PM

    Hi Hemant,
    I think you should add a section on “Do NOT do this for tax exemption”” like rushing to buy some insurance policy ..etc..
    Also do not see ELSS here .. is it bcaus of the recent runup in the market?

  • Oulag March 11, 2014, 9:29 PM

    I have a query on Section-80DDB Expenses incurred for specific diseases. Recently I spent around 3 lakhs for the treatment of kidney failure for my mother. Although I had a hospitalization insurance through my company, I paid a 10% of co-payment amount for the treatment amounting to around Rs.30,000/- plus other charges which were excluded by the insurance company. Hence, whether the amount whatever I have paid including the 10% co-payment can be furnished for availing deduction under section 80 DDB. Kindly help me to clarify. Thanks in advance. – Oulag

    • Vikas March 30, 2014, 9:43 PM

      Oulag,

      The proviso to section 80DDB states that

      Provided further that the deduction under this section shall be reduced by the amount received, if any, under an insurance from an insurer, or reimbursed by an employer, for the medical treatment of the person referred to in clause (a) or clause (b) :

      This means that if there is any insurance claim , then deduction shall be allowed by reducing the insurance amount received from expenditure incurred .
      In nutshell computation of deduction is as under
      Total expenditure xxxxx
      Less Insurance claim xxxxx
      Net Expenditure xxxxx

      Net Expenditure allowed as deduction to the maximum of Rs 40,000 (Rs 60,000 in case of Sr. Citizen) .

  • Devendra Bhagwat March 13, 2014, 6:15 PM

    Hi,
    I have two doubts.
    1. LIC agent told me that LIC policy Jeevan Anand comes under special tax benefit section 80CCE. How it is different fro 80C? If im under 10% Taxation category, do i have any extra tax benefit from this policy being 80CCE?
    2. If I’m doing repayment for home loan [Home is in my Father’s name, I’m only doing all premium repayments,His income is less, he is Farmer,I’m IT professional and I’m the only son ] can i get tax benefit for home loan on interest and/or principal repayment??
    Thanks in Advance

    • Vikas March 30, 2014, 10:04 PM

      Devendra,

      1.80CCE is a section where 80C, 80CCC and 80CCD (related to pension contribution) are clubbed together. The maximum limit for this section is kept at Rs 1 lakh. Life insurance premium tax benefit comes under sec 80C . So the difference between the two is that sec 80C comes under 80CCE along with other sections. There is no extra benefit.
      2. You can avail tax benefit on home only if you have an ownership (partially or full) in the house. If the house is in the name of your father, as per rule you are not eligible to claim tax benefit.

      • Devendra Bhagwat April 2, 2014, 12:25 PM

        ok. Thanks for the info Vikas :).

      • akram July 13, 2014, 1:31 PM

        “The maximum limit for this section is kept at Rs 1 lakh”

        pls clarify “this section”refers to 80CCE or 80C ?

  • mebin ninan March 13, 2014, 7:20 PM

    Hi..what about the website called fundsindia. Is it trustable to invest through there website.what is your opinion.

    • Vikas March 30, 2014, 10:07 PM

      Mebin,

      Its an online platform for investing. In my view you can invest through websites. While investing online you have to agree to the terms which you should go through before availing services.

  • Annapurna March 20, 2014, 5:31 AM

    Good read. The last minute rush to fully avail the 80 c benefit often results in people making unsuitable investments – the most common being ULIPs and traditional plans – in order to save on tax for a year, they end up paying paying premiums for 5 or 10 years on something they didn’t require in the first place.

  • Prabhakar Malshe March 20, 2014, 12:18 PM

    I am required to periodically go to Specialised doctors with the pathological rewports. Whether the amounts paid for tests and fees paid to Doctor be claimed as exemption u/s 80D within the limit of Rs.5000/-
    Thanks and regards.

  • JUNED AHMAD SIDDIQUI March 28, 2014, 7:58 AM

    Realy very good article

  • Ramesh April 7, 2014, 3:07 AM

    TDS is deducted by banks for interest paid or accrued. For ITax calculation it is necessary to verify actual TDS deducted by the bank and reported. To verify same NSDL used to provide Tax credit statements as Form 26AS. it was very useful. later this task was shifted to TRACES website. Now we always get the response Traces website not available due to technical reasons. this problem is occurring fir the past several months! I am abroad. is there an alternative? is this problem with all or just me?

  • Ramesh April 8, 2014, 7:42 AM

    we get 80cc rebate of 1 Lakh if we invest in SCSS. after 5 years it matures and we can extend it for another 3 years.

    can we withdraw after 5 years and reinvest on same or anyothet bank for another 3 years after a lapse of one year?

    do we get another 80cc deduction of 1 Lakh when we reinvest / extend for another 3 years.

    can we extend for 5 years again instead of 3 years

    the interest rate was earlier 9% but was later on improved but we continued to get 9% for the first 5 years. now if we extend will we get 9% or higher interest rate?

    thanks for your valuable opinion.

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