tax-saving-options

Tax Saving Options

Tax Saving Options

There are several tax-saving investment schemes available under the income tax act to reduce tax outgo without any stress.
To make money grow, it is important to make a smarter and effective investment for personal and future financial goals for children’s education, retirement, etc.
Indian Income Tax Act of 1961 has various tax-saving options available that help investors invest and reduce tax liability.
Most of these tax-saving options fall under section 80C of the Income Tax Act. The deductions available for all investment options are priced at RS. 1.5 lakh.
Let’s look at some of the best tax saving options and how they can help to save one tax in detail.

When it comes to tax saving options, the provident fund is considered the best tax-saving investment under section 80C for investors looking at lesser risk.
PPF investments come with a lock-in period of 15 years, and individuals can extend every five years as per their own paying capacity.
The Ministry of Finance decides the interest rate in PPF, and right now, the interest rate is 7.9% per annum.
The best thing about PPF is that it provides tax benefits at all levels in India. It generally means that PPF contributions are deductible under section 80C; further, the collected amount and interest also become tax-free on withdrawal.
PPF is one of the best tax saving schemes because it offers tax benefits in a long term investment horizon, which is suitable to all citizens of India.

ELSS is a diversified equity mutual fund that provides tax benefits under section 80C. The money taken from investors for ELSS is primarily invested in the stock market.
ELSS has a lock-in period of three years. Moreover, if you select the SIP option, each SIP instalment has a different maturity date.
One major benefit of ELSS is it gives comparatively higher returns because they are linked to the market. Hence, ELSS is one of the most beneficial and profitable tax-saving investment options.

ULIP’s are also considered tax saving scheme because it is eligible for deduction under section 80C. In addition, ULIP’s cover both market-linked returns and life cover returns and have a lock-in –period of five years.
In ULIPs, a premium’s part is used to provide life cover, and another part is invested directly in funds as per your choice.
There are a variety of options to invest in ULIPs, and the return on investment is market-linked. The investment returns are also exempt from tax under section 10 (10D) of the income tax act.

Sukanya Samridhi Yojana has become an essential tax saving scheme in India. It was launched in 2005 by the Indian government as a part of the Beti Bachao Beti Padhao campaign.
This campaign made a significant impact on the general public. The Sukanya Samridhi Yojana scheme allows a fixed income investment where the taxpayer invests regular deposit and earn regular interest at the same time.
Investing in Sukanya Samridhi Yojana also gives you a deduction under section 80C of the income tax act.
The government of India determines the rate of interest on the scheme every quarter and is payable on maturity. The scheme has a lock-in period of 21 years, and a minimum deposit of RS 150 is to be paid for 15 years.
The eligibility criteria for this tax saving option to open a Sukanya Samriddhi account is shown below:

  • Only girl children can claim the benefits of this scheme.
  • The girl child cannot surpass the ten year age. A grace period of one year is provided, which allows the parent to invest with one year of the girl child being ten years of age.
  • The investor must submit age proof of the daughter.

Fixed deposit is another tax-saving investment that is safer in terms of risk and returns. The banks decide the interest rate on fixed deposits. Here are some features of a tax-saving fixed deposit.

  • A minimum lock-in period of 5 years.
  • The interest rate on investment is higher, especially for senior citizens
  • Investment in fixed deposit is eligible for deduction under 80C while calculating the taxable income
  • If they have a joint account, the primary holder can benefit from tax deduction while calculating the taxable income.
  • After the expiry of 5 year lock-in period, the tax saver gets access to premature withdrawal. However, the terms and conditions depend from bank to bank.

6. National Savings Certificate (NSC) NSC is one of the best tax saving options for small investors because it’s like a fixed income investment.
Like PPF, this tax option comes with low risk and offer guaranteed returns. NSC has two different maturity periods; five years and ten years.
There is no limit on upper investment, but like other 80C investments, the maximum amount available for deduction is Rs 1.5 lakh, and the rate of interest is 7.9 per cent compounded annually.

  • How many years of lock-in period is there in PPF?
  • PPF investments come with a lock-in period of 15 years, and individuals can extend every five years as per their own paying capacity.

  • What is the major benefit of investing in ELSS?
  • One major benefit of ELSS is it gives comparatively higher returns because they are linked to the market. Hence, ELSS is one of the most beneficial and profitable tax-saving investment options.

  • Why PPF is considered one of the best tax saving schemes?
  • PPF is one of the best tax saving schemes because it offers tax benefits in a long term investment horizon, which is suitable to all citizens of India.

  • How many maturity periods are there in NSC?
  • NSC has two different maturity periods; five years and ten years. There is no limit on upper investment, but like other 80C investments, the maximum amount available for deduction is Rs 1.5 lakh, and the rate of interest is 7.9 per cent compounded annually.