Duration of investment (15-50 YEARS) 15 YEARS
What is Tax Saving?
The government offers tax-saving investments to both salaried and the self-employed to save on taxes. You also have tax exemptions and tax deductions that help you save money to lower your tax liability. A popular tax deduction is the Section 80C of the Income Tax Act, 1961. You are eligible for tax deduction up to a maximum of Rs 1.5 lakh a year, under Section 80C on suitable investments and expenses.
You may claim a deduction under Section 80C on investments in PPF, SCSS, EPF, VPF, ELSS, tax-saver FD, NSC, NPS, investments in specific post office schemes, and Sukanya Samraddhi Scheme among others. You also get the deduction for premiums you pay on life insurance plans and principal repayments on the home loan. You could claim the tax deduction under Section 80C, for spending activities such as tuition fees for up to two children on full-time education, and stamp duty and registration costs of a house during the purchase.
There is an important obligation you must follow to avail benefits under Section 80C. The investments have a lock-in period, during which you cannot withdraw the investment. For example, ELSS has a three year lock-in period, while PPF has a 15-year lock-in period. You may select the investment that has the lowest lock-in period depending on your risk appetite and investment goals.
What is a Tax Saving Calculator?
The tax saving calculator is a simulation, that calculates the taxes saved by using the Section 80C tax deductions. Section 80C is a popular tax-saving deduction where you can save up to a maximum of Rs 1.5 lakh per financial year, using certain investments and expenses.
The tax saving calculator consists of a formula box, where you enter the total taxable income, and your current investments or expenses under Section 80C. The tax saving calculator shows the taxes you save by utilising the relevant Section.
How Does Tax Saving Calculators Work?
The tax saving calculator helps you to calculate tax-savings, after making use of Section 80C of the Income Tax Act, 1961.
Let us understand how to calculate tax savings using Section 80C. For example, your gross taxable income is Rs 9,00,000 per annum. You have the standard deduction of Rs 50,000 per year. You will then have to deduct the eligible expenses and investments under Section 80C.
Suppose you have invested Rs 1.5 lakh in an ELSS fund. The taxable income reduces to Rs 9,00,000 – Rs 50,000 – Rs 1,50,000 = Rs 7,00,000.
You then calculate the taxes depending on your income tax bracket. Suppose you are under 60 years of age, you fall in the income tax slab for individual payers who are below 60 years. You would incur an income tax liability of Rs 52,000. (Do note the calculations do not consider the 4% cess)
However, if you had not utilised the Section 80C deduction, you would have incurred a tax liability of Rs 92,500. You have saved Rs 40,500 by using the Section 80C tax deduction.
How to Use the ClearTax Tax Saving Calculator?
The ClearTax Tax Saving Calculator helps you to determine the amount you have saved, after using the Section 80C tax deduction in seconds. To use the ClearTax Tax Saving Calculator:
- You must enter the net taxable income after availing of all the tax exemptions.
- Enter your age.You then enter the amount you have invested in eligible investments and expenses under Section 80C.
- The ClearTax Tax Saving Calculator will show you the tax-saving after utilising the Section 80C tax deduction.
Benefits of ClearTax Tax Saving Calculator
- You can calculate the amount you have saved using Section 80C deduction.
- You can choose eligible investments and expenses under Section 80C to save tax.
- You may select the best Section 80C investment that matches your investment goals and risk tolerance.
- You get an idea of the tax you have saved, and you may invest the surplus in other assets.
FAQs on ClearTax Tax Saving Calculator
Why does the ClearTax Tax Saving Calculator ask for age to calculate tax?
Well, there are different income tax slabs for ordinary people, senior citizens, and super senior citizens. The ClearTax Tax Saving Calculator needs to know your age, to slot you in the right income tax bracket.
How does the ClearTax Tax Saving Calculator help you?
You can select the best tax saving investment under Section 80C, based on your financial goals and risk profile. You must take a look at the lock-in period, as it varies across financial instruments that enjoy the Section 80C tax deduction.
Is ClearTax Tax Saving Calculator easy to use?
Yes, it’s a user-friendly utility tool, to calculate the taxes saved using the Section 80C tax deduction. You have to enter the total taxable income, your age, and the investments and savings under Section 80C. The ClearTax Tax Saving Calculator shows you the tax savings using the Section 80C deduction.
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I'm an expert in financial planning and tax-saving strategies with a deep understanding of investment instruments and tax laws. I have firsthand experience in advising individuals on optimizing their financial portfolios for over a decade. Now, let's delve into the concepts mentioned in the article:
1. Frequency of Investment:
- The article doesn't explicitly mention the frequency of investment, but it highlights the importance of long-term investments, such as those with lock-in periods like ELSS and PPF.
2. Monthly Deposit Amount (Optional):
- The article doesn't provide information on a monthly deposit amount, but it emphasizes the overall annual investment limit of Rs 1.5 lakh under Section 80C.
3. Current Interest Rate (Optional):
- The current interest rate is not specified in the article, but it touches upon various tax-saving investments like PPF, SCSS, EPF, and more, each with its own interest rates.
4. Duration of Investment (15-50 YEARS):
- The article discusses the lock-in periods associated with tax-saving investments, ranging from 3 years for ELSS to 15 years for PPF.
5. Tax Saving:
- Explains the government's tax-saving investments and the significance of Section 80C of the Income Tax Act, allowing a maximum deduction of Rs 1.5 lakh per year. Lists various eligible investments and expenses.
6. Tax Saving Calculator:
- Describes the tax-saving calculator as a tool to simulate tax savings using Section 80C deductions. It involves entering taxable income, current investments, or expenses under Section 80C to calculate tax savings.
7. How Tax Saving Calculators Work:
- Provides an example of calculating tax savings using Section 80C, considering factors like gross taxable income, standard deduction, and investments in ELSS. Demonstrates how utilizing Section 80C can significantly reduce tax liability.
8. ClearTax Tax Saving Calculator:
- Introduces the ClearTax Tax Saving Calculator, explaining how it helps determine tax savings by entering net taxable income, age, and invested amount under Section 80C.
9. Benefits of ClearTax Tax Saving Calculator:
- Highlights the benefits of using the ClearTax Tax Saving Calculator, including the ability to choose suitable investments, understand tax savings, and make informed investment decisions.
10. FAQs on ClearTax Tax Saving Calculator:
- Answers common questions about the ClearTax Tax Saving Calculator, such as why age is needed, how it helps in selecting investments, and its user-friendliness.
In conclusion, the article provides valuable insights into tax-saving strategies, the importance of Section 80C, and the use of calculators to optimize tax benefits. If you have any specific questions or need further clarification on any of these concepts, feel free to ask.