Tax Saving Investments

Taxes saving investment plans are a great way of achieving financial goals. There is a plethora of Investment schemes available in the market that provides tax exemption and deductions.

You can choose from many tax saving mutual funds to claim tax exemptions or tax deduction under section 80c or section 80ccc.

There are some investment avenues that provide a further tax deduction. Let’s have a look at the best tax-saving investments under section 80C of the IT Act.

Best Tax-Saving Investments under Section 80C

1. ELSS (Equity-Linked Saving Scheme) Mutual Fund

The equity-linked saving scheme is the varied mutual fund scheme, which has two features:

  • ELSS scheme is eligible for tax exemption up to Rs.1.5 lakh under the Income Tax Act.
  • This ELSS scheme has 3 years of the lock-in period

2. National Pension Scheme (NPS)

One of the best tax-saving investment schemes is the National Pension Scheme. it provides tax-exemption under three different sections:

  1. Maximum Rs.1.5 lakh can be claimed for tax exemption under Act.
  2. One can get an extra deduction up to Rs.50,000.
  3. If 10% of the salary of an employee is contributed by the employer in the National Pension Scheme, then the amount is not taxed

3. Unit Linked Insurance Plan (ULIP)

ULIPs not only provide tax exemption benefits but also help to gain high returns on investment. new age ULIPs launched by the insurance companies come with zero premium and zero administration charges, which result in better returns to the investors.

4. Public Provident Fund (PPF)

PPF is a popular investment scheme that helps investors to create financial cushion post-retirement. The interest rate on the PPF balance is reset on a quarterly basis.

5. Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is a small deposit scheme, which is particularly designed for the girl child. The plan is launched as part of the ‘Beti Bachao Beti Padhao’ campaign.

Tax benefit offers under SSY are:

  • Tax exemption up to the maximum limit of Rs.1.5 lakh under the IT Act.
  • The maturity proceeds and withdrawal amount are also tax exempted.

6. National Savings Certificate

The National savings certificate ensures the safety of investment, as it is a government based savings scheme. It is like a bank FDs which offer a guaranteed return on investment.

Tax benefits offered under the policy are:

  • One can claim tax deduction up to Rs.1.5 lakh under the IT Act.
  • The interest earned is added back to the initial investments.
  • In the second year of investment, the investors can claim a tax deduction as well as the interest earned last year.

7. Senior Citizen Saving Scheme

The senior citizen savings scheme is specifically made to provide financial safety to senior citizens. Under this scheme, the investors need to deposit minimum Rs.1000 and can invest up to a maximum Rs.15 lakh.

As compared to the other tax-saving investments schemes, the senior citizen saving scheme offers the highest interest rate of 8.7% per annum. Also it ensures a guaranteed return to the investors.

8. Bank Fixed Deposit Scheme

Bank FDs are security deposits that are like other guaranteed return investment options. But the only difference is that the tenure in Bank FDs is for 5 years. This plan is best suitable for individuals who have a low-risk appetite and want to save money.

9. Insurance

Life Insurance is a tax-saving investment product available in the market. Yet, it is not advised to the individuals to buy a life insurance policy. Because the main aim of these insurance policies is to provide insurance coverage.

How to Plan the Tax-saving Investments

The best time to plan the tax-saving investments is at the beginning of the financial year. Because the investments can multiply over a long-term period and can help the individual to fulfill their goals. The tax-payers can follow these pointers to plan the tax saving for the year:

  • Check your tax-saving expenses which pre-exist like insurance premium, the contribution in EPF account, children’s tuition fees, home loan repayment, and many more.
  • If tax-saving expenses cover the up to Rs.1.5 lakh then you don’t need to invest the entire amount.
  • Choose tax-saving investments like PPF, Bank FDs, and ELSS funds.

Payment Applicable for Tax Saving Deduction U/S 80C

  • Life Insurance Premium Payments
  • Children’s Tuition Fees Payments
  • Home Loan Repayment