Income Tax Alert! Top 5 investments solutions that save money for you during ITR filing

Income tax outgo can be saved by an earning individual if he or she is well aware of Section 80C of the Income Tax Act 1961.

Income Tax: Here are the top 5 investments that helps an investor save one's money outgo during the income tax return filing. Photo: Reuters

Income Tax: Belated income tax filing due date of 31st December 2019 is fast approaching. If an income taxpayer, whose annual income is above Rs 5 lakh, files late income tax (after December 31st) then he or she will have to pay a penalty of up to Rs 5,000 while in the case of an earning individual whose income is less than Rs 5 lakh will have to pay a penalty of Rs 1,000 - for late income tax filing. However, when things deteriorate, even more, the penalty may soar further and go up to double of the current late income tax filing penalty. Therefore, an earning individual is advised to file the income tax by 31st December 2019.

However, there are some other angles too, that an income taxpayer must look at. And that is an investment. There are various sections of the Income Tax Act 1961 that provide income tax exemption to the income tax-payer, allowing him to save his money.

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Speaking on the matter, Preeti Khurana, Chief Editor at ClearTax said, "Having an idea about Section 80C of the Income Tax Act is enough to invest with higher returns along with money outgo during ITR filing. Under Section 80C, there are some investment plans that give better returns and income tax exemption on up to Rs 1.5 lakh investment in a financial year. Investment plans like ELSS Mutual Funds, Public Provident Fund, Provident Fund, Tax Saver FD, Sukanya Samriddhi Scheme, etc. are such investment options that give higher returns along with income tax exemption. So, first and foremost, an earning individual must understand Section 80C and its benefits during ITR filing."

Khurana listed out the following 5 top ways to save income tax outgo and get higher investment returns:

1] Life Insurance Policy with Money Back Offer: Premium paid on Life Insurance with money back offer is income tax exempted under Section 80C of the Income Tax Act 1961. In this category both ULIP (unit Linked Investment Plan) and traditional life insurance policy fall under Section 80C benefit. However, to avail income tax exemption, the annual premium should not be more than 10 per cent of the sum assured and the income taxpayer must have paid two years premium of the life insurance policy with a money-back offer.

2] Sukanya Samriddhi Yojana: This is also one of the most suitable investment options that offer EEE benefits to the investor. In Sukanya Samriddhi Scheme, an investor can get income tax benefits on investment, interest earned and the maturity amount. The Sukanya Samriddhi Scheme is currently giving 8.60 per cent return to the investor. In this scheme, an investor an open a Sukanaya Samriddhi Account in the name of his or her girl child, if she is below 10 years of age. An investor can invest in this account up to 14 years of his or her girl child age and can withdraw 50 per cent of the maturity amount after the girl become 18 years of age. Investment in Sukanya Samriddhi Yojana matures after the girl child becomes 21 years of age. But, one can't withdraw the invested amount before the girl child turns 18.

3] Public Provident Fund or PPF: In this investment plan, one can get income tax benefit on investment up to Rs 1.5 lakh in a financial year. Currently, this scheme is giving 7.9 per cent annual return to the investors and it's 100 per cent risk-free. In PPF investment, there is a lock-in period of 15 years and like Sukanya Samriddhi Scheme, PPF also falls under the EEE category.

4] ELSS Mutual Funds: Investments under Equity Linked Saving Scheme (ELSS) mutual funds are exempted from the income tax outgo. According to tax and investment experts, ELSS mutual fund is one of the equity mutual funds and in the long-term perspective, it gives at least 12 per cent return to an investor.

5] Post Office Savings: Like tax saving FD, post office fixed deposits for the period of five years are income tax exempted. The only difference between tax-saving FDs and post office FD is just one — post office FD interest rate a the time of opening the fixed deposit account would incur the same amount for the whole period of investment.

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