Income Tax return (ITR) filing: Top 5 last minute tips to save money

Income Tax return (ITR) filing: Investment is essential to growing wealth with time, and one must focus on both short and long-term financial goals to secure one’s financial future. All taxpayers should closely examine each investment tool, gauge the risks involved and asses the value of its inflation-and-tax-adjusted returns before taking last-minute decisions.

With the investment deadline inching closer, taxpayers are on their toes trying to collate all their investments and ensure saving the maximum possible of their income tax. Only a few days are left for the financial year to end and many of them have still not submitted their tax savings investment. As a smart taxpayer, one should select the appropriate mode of investment in order to save money and taxes both.

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Tax-saving products provide immediate returns in the form of taxes saved in the year of investment, which serve as big motivators for saving for the future. The higher a person in the tax bracket, the more would be the gain. But choosing the right product when one has multiple saving and investments to pick from, makes it more difficult.

Follow these five last-minute tax-saving tips by Prashant Sharma, Chief Investment Officer, Aviva Life Insurance to ensure you make the maximum savings on your income this tax season:

1] Make the most of Section 80C: The Section 80C of the Income Tax Act allows tax deduction of up to Rs 1.5 lakh, allows you to make investments of the total amount through a wide range of available financial instruments. Investing in the right instruments not just allows you to save tax but also ensures you are actively planning for your financial goals. You may opt for investments in Public Provident Fund (PPF), National Saving Certificate (NSC), bank Fixed Deposits (FD), Life Insurance plans etc. You should invest in products that you require and not just for the sake of investing, and opt for investing online as it ensures efficiency and avoids last-minute panic. While offline payments leave chances of things going wrong, like a bounced cheque for instance, online transactions ensure a seamless procedure and avoid any last-minute crisis.

2] Invest in insurance plans: There are many investment options like ULIPs and traditional insurance plans, to save tax apart from personal expenses. It is very important to select the right insurance policy as the purpose of a good insurance policy is to provide adequate risk cover. Health insurance is a crucial investment you can choose. The right health insurance plans not only enable you to save tax under Section 80D of the Income Tax Act, but also provide you financial protection at the time of hospitalization. Section 80D allows you a deduction of up to Rs 25,000 for premiums paid and Rs 50,000 to people above the age of 60 years.

3] Invest in other sections apart from Section 80C and 80D: Your investments should not be limited to only the sections. There are multiple lesser-known investment options that allow you to save on income tax like Section 80G, 80GGA, and 80GGC. Under these sections you may claim tax deduction benefits on expenses on medical treatment, donations made to NGOs or political parties. Additionally, under Section 80TTA, tax deduction benefit of up to Rs 10,000 is allowed on interests on your savings bank account. 

4] Take professional advice: This is the time of the year when many start exploring options for tax saving investments to minimise their tax liability. And in this last moment rush, many end up choosing the wrong option which they will probably repent later. It is always advisable to consult an expert who would be able to guide you with the right type of investments that offer tax saving and also help you keep up with your financial plans.

5] Start investing early: Don’t wait for the end moment: Start planning your investments right from the beginning of a financial year as chances of errors in last-minute decisions are significantly high. To avoid shortfall, start early as it would allow you to explore your options and make a sound decision about your investments which would also help in your long-term wealth creation plan.

Saving taxes is not a year-end activity and as a smart taxpayer, one needs to proactively plan and manage tax profiles at the beginning of the year to make maximum utilisation of all tax-saving opportunities.

Authored by Prashant Sharma, CIO, Aviva Life Insurance