Tax season can feel overwhelming, but with the right strategies, you can notably reduce your tax burden and even save money. One of the most effective ways to achieve this is by maximising your deductions. Using an income tax calculator can be invaluable in this process, as it helps you estimate your tax liability and pinpoint potential opportunities for savings.
In this blog, we’ll explain how to use an income tax calculator effectively and why life insurance is an excellent way to maximise deductions.
What are Tax Deductions?
By claiming tax deductions, you can decrease the taxable portion of your income, ultimately lowering your tax bill. Deductions are available for expenses such as investments, loans, and life insurance policies.
For instance, contributing to a life insurance policy can give you tax benefits under Section 80C of the Income Tax Act. Knowing how to calculate your deductions using an income tax calculator will help you optimise your savings each year.
How Life Insurance Helps You to Save Tax?
Life insurance helps in securing your finances and your family’s future. By investing in a life insurance policy, you’re eligible for tax deductions under Section 80C of the Income Tax Act, which is one of the most popular tax-saving options available.
When you pay your premiums for life insurance, you can remove these payments from your taxable income, thus lowering the total amount of tax you need to pay. This is especially helpful for individuals looking to save on their tax liabilities while also ensuring that their loved ones are financially protected.
Section 80C Deductions: A Deep Dive
Section 80C offers a wide range of deductions, and life insurance premiums are a key part of it. Here’s a quick breakdown:
| Tax Deduction Type | Eligible Deductions |
| Life Insurance Premiums | Premiums paid for self, spouse, children, and parents |
| Maximum Deduction Limit | ₹1.5 lakh (cumulative across all eligible investments) |
Apart from life insurance premiums, Section 80C also covers deductions for investments in PPF, EPF, tax-saving fixed deposits, and more. However, you should always be mindful of the overall limit of ₹1.5 lakh across all such investments.
Maximising the use of Section 80C not only reduces the taxable income but also allows you to diversify your investments, which is a key factor in securing your future. Life insurance premiums should, therefore, be an integral part of your tax-saving strategy.
Using an Income Tax Calculator to Maximise Deductions
An income tax calculator is a brilliant tool to estimate how much tax you’ll need to pay based on your income and deductions. By inputting details like your salary, other income sources, and deductions (including life insurance premiums), you can get a quick idea of your tax liability.
Here’s how using a calculator can help you:
- Estimate Your Total Deductions:You can input your life insurance premium details and see how much you can save.
- Prevents Errors: Automating the calculation process reduces the risk of errors in claiming deductions, ensuring you don’t miss out on potential savings.
- Track Your Tax Savings:You can experiment with different premium payments and other deductions to see how much your savings would increase.
With a few clicks, you can optimise your tax planning and ensure you’re making the most of every deduction available to you.
Start Maximising Your Tax Savings Today
By making smart choices like investing in life insurance, you can significantly reduce your tax liability. Use an income tax calculator to estimate your savings and ensure you’re getting the most out of your deductions.
Remember, maximising your tax savings doesn’t have to be complicated. With the right tools and strategies in place, you can manage your taxes effectively. Canara HSBC Life Insurance offers various policies that not only secure your future but also help you optimise your tax deductions.
