Tax saving options to help meet your long-term goals: Know them before you invest !!

The last date to save tax on income earned during the financial year 2020-21 is March 31, 2021. In the previous year, the last date was extended by the government, but may not be extended this time. For many of us, tax saving time begins only when there is a call from the accounts department. Instead of being a one-time affair, efficient tax planning should begin in the start of every financial year. This approach helps you not only save tax but also link your tax saving investments to your medium to long term goals.

- Sanjeev Puri

For the financial year 2020-21, the taxpayers have an alternate option to choose. In addition to the existing tax regime there is the new tax regime made available in Budget 2020, that one may opt for. However, in doing so and opting for the new tax regime, the taxpayer will not be able to utilize most of the tax saving options available largely under section 80C and Section 80D of the Income Tax Act, 1961. However, the tax slabs are rationalized, and rates are lower in the new tax regime and hence one needs to find out which of the option suits them. While the new tax regime is bereft of the provisions of tax savings, except for saving tax through NPS under Section 80CCD (2), the old tax regime still allows tax savings through PPF, NSC, ELSS etc under section 80C of the Income Tax Act.

The deductions, available under Section 80C up to Rs 1.5 lakh per annum, include benefits for expenses incurred as well as for investments made. The investment-related tax breaks are largely on specified investments, such as traditional life insurance premium, unit-linked insurance plan (Ulip), Public Provident Fund (PPF), National Savings Certificate (NSC), Senior Citizens’ Savings Scheme (SCSS) and Equity-linked Savings Scheme (ELSS) from mutual funds (MFs) amongst others.

Here are some investment options allowed under existing tax regime using which you can save tax and grow funds to meet your long-term goals well.

Equity-linked savings schemes (ELSS)