There are some specific investment options under Income Tax that you should consider adding to your portfolio before December ends. This will help you save taxes.
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FY2025-26 Tax Savings: The time has come for tax planning for the financial year 2025-26, and if you want to avoid last-minute rush before the end of the financial year, December is the most crucial month for you. This is the right time to finalize your investment strategies for effective tax savings. Acting now is essential to maximize the benefits under sections 80C, 80D, and 80G of the Income Tax Act. By investing under these sections, you can not only reduce your tax liability but also secure your future. Let’s explore the specific investment options you should include in your portfolio before December ends.
Tax Saving Tools Under Section 80C
Life Insurance
Life insurance premiums paid by taxpayers are tax deductible under the Income Tax Act. Insurance plans include term plans, savings insurance solutions, wealth solutions, retirement plans, and combination solutions. According to TataAIA, life insurance premiums and quotations vary depending on the plan’s features and riders. Therefore, you can save tax by customizing the plan to suit your financial needs.
Sukanya Samriddhi Yojana
This is a popular government savings scheme for daughters up to 10 years of age. Investments in this scheme are eligible for tax deduction under Section 80C. You can start investing in this scheme.
Investing in ELSS is also an option.
Equity Linked Savings Scheme is a mutual fund scheme that offers returns linked to the equity market. It also offers tax exemption under Section 80C, but it has a mandatory lock-in period of three years.
Other popular and safe investment options
Investments in these are also eligible for tax deductions up to a maximum limit of ₹1.5 lakh, such as the Public Provident Fund (PPF), National Savings Certificate (NSC), and the Senior Citizen Savings Scheme (SCSS) for senior citizens. Additionally, you can invest in fixed deposits with a lock-in period of 5 years.
Real Estate Tax Benefits
The principal amount paid as a home loan EMI is also eligible for tax deduction under Section 80C. This benefit applies after the completion of construction or purchase of the home. Furthermore, if you build a house or purchase a property, you can also deduct the stamp duty and registration expenses from your gross income after acquiring full ownership and avail tax benefits.
Tax Saving Options under Section 80D
Purchasing a Health Insurance Policy
Purchasing a health insurance policy is essential to avail tax benefits under Section 80D of the Income Tax Act. Therefore, Section 80D provides tax deductions to taxpayers who have made the decision. Individuals or HUFs can claim a deduction from their gross income for medical insurance premiums paid for any year. Under this section, individuals can avail up to ₹25,000 in a financial year. And, for senior citizens, this limit is ₹50,000.
Tax Deductions Under Section 80G
The Government of India, in gratitude to taxpayers who contribute to certain social welfare funds, offers them tax savings under Section 80G. This exemption applies to individuals, companies, and firms. Some donations are 100% tax deductible without any qualifying limit. These include donations to the Prime Minister’s National Relief Fund, the National Defence Fund, and medical aid funds for the poor established by state governments. Some donations are eligible for a 50% tax deduction, such as the Prime Minister’s Drought Relief Fund and the Jawaharlal Nehru Memorial Fund.
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