It is January, and your employer would be asking the Tax Saving Investment proofs. Did you invest as much as you have declared? Argh! You could not invest as much you had promised. So, It would be a double whammy! Less saving but more tax. Is there a way to save tax as much as possible without disturbing the monthly budget? Is there any last minute tax-saving tips?
Relax! There are few tricks to save tax without jeopardizing your monthly expense. I have discovered the 7 ways to save tax at last moment. Among these tips, You have to follow these two principles.
- Shift money from non-tax saving investment to tax saving investment
- Redeem Investments which has completed the Lock-in period and Reinvest
Recommended: Latest Income Tax Slab Rate (FY 2018-19)
1- Redeem ELSS and Reinvest
You know that ELSS Aka Tax Saving Mutual funds have the shortest lock-in period. You can withdraw money from the ELSS just after 3 years. So, think about that. Did you invest some money in the ELSS, three years back? If yes, what are you thinking for? Go and redeem that money and reinvest the amount in a better ELSS fund or into the same scheme.
You should reinvest in the ELSS if you believe that ELSS would give a Good return in future. Else, you can also invest in PPF or other tax saving investments.
On the other hand, if you see potential in your existing ELSS fund, you must reinvest in the same scheme. It may cost you some amount because of this round tripping, but it would be far less than your tax saving.
Also Read: Best ELSS of 2018
2. Switch NPS Account
This trick is useful to those who invest in NPS. In this method, you have to switch your Tier-2 fund to tier-1. You may be aware that NPS tier-1 account gives you the tax benefit under section 80C. Whereas NPS Tier-2 account does not give any tax benefit. The tier-2 account is an open account and you can withdraw money anytime.
Thus, if you have invested any amount in Tier-2 account, switch it to the Tier-1. It would give you tax benefit without using your salary. Thus you would be using your non-tax saving investment to avail the tax benefit.
You can switch your fund from Tier-2 to tier-1 using the Form UOS – S13. You can also do it online. The switching facility is only available to Non-Government NPS subscribers.
Note, investment in NPS tier-1 account gets locked until the age of 60.
3- Pay Rent To Your Parents
House Rent Allowance can save a big amount of your tax. If your employer is giving a part of your salary in the form of HRA, then you must avail the tax benefit associated with it. It is true that this Allowance gives you tax benefit only if you are living in a rented house. But, one can also take this tax benefit if he/she is living with parents.
You can pay rent to your parents. This payment would be similar to the other rent payments. You can claim this rent payment for HRA exemption. Did, you take full benefit of HRA? If not Use this option immediately.
Note, you have to follow rules of HRA exemption. The payment should be real and you must take receipt of that.
Also Read: 7 More Ways To Save Tax If You Have A Family
4- Break FD and Invest in PPF
Everyone, put some money into the bank fixed deposit. But this deposit does not give you any tax benefit. You should think of using this deposit for tax saving at last minute. If you don’t have sufficient fund to invest in Tax Saving Instruments, Why don’t you break the FD?
Yes, there would be a loss of 0.5% of interest, but this loss would be very small in comparison to the tax saving. If you invest this amount in PPF, the interest income would be better than the bank FD. Hence, your loss of interest would be compensated by the better interest rate of PPF. Moreover, the interest income of PPF account would be tax-free.
Are you concerned about the long lock-in period of PPF account? Don’t worry, you can withdraw the partial amount. The rules are relaxed now. You can apply partial PPF withdrawal online, as well.
5- Take Loan from PPF account
The PPF account gives you the facility of Loan. You can use this loan to invest in any of the tax saving instrument. The loan is available after the completion of one financial year. You can take maximum 25% of the balance amount of PPF account. The balance amount is seen at the end of last financial year. You can learn more about the PPF Loan.
The PPF loan is very handy when you don’t have money to invest for tax saving. After using it to save tax, you can pay back this amount in the next 3 years. I would suggest to pay it in the next one year.
6- Open a PPF Account for Wife
The housewives often have their own savings. The husbands don’t have any right to touch it, even for saving the tax. But, a simple tweak can benefit both of you.
The housewives, often keep their money at the house or in the bank account. You can use this saving for your own benefit. You have to only motivate her to open a PPF account. If your wife opens a PPF account, you can claim the deposit for the 80C tax deduction. Any investment by your wife is eligible for your tax deduction.
Unless your wife earns herself, all of her investment and saving would be clubbed with you, Therefore, her investment would be also considered as your investment. Anyway, it was your money, which you may have gifted to her.
7- Pay Tuition Fees in Advance
The tuition Fees for your children is also eligible for tax deduction. Often people forget about it. If you are also one of them, find out the receipts and claim it for the deduction.
Even, to avail the maximum tax deduction, you can pay the tuition fees in advance. Anyway, you would be paying it in the next 3 months. If you pay it earlier, it would also give you more tax deduction.
Note, only tuition fees is eligible for tax deduction, other payments such as admission fees, term fees, development fees etc are not eligible for the deduction.
So, These were the tax saving tips for those who could not invest enough amount on time and now struggling to arrange money for the investments. I hope these ideas would help you to save more tax.