Tax on your annual income is as annoying as pineapples on Pizza, right?
Trust us, we hear you.
You can pick those annoying pizza toppings and save yourself from misery. Similarly, you can save a ton of tax if you know where to invest.
As much as you might dislike it, you gotta do the taxes.
Don’t worry though. Our team has shortlisted some popular and useful tax-saving instruments. So get a pen and paper and note down beneficial investment avenues for you.
Let’s save some tax, shall we?
Equity Linked Saving Scheme is one of the popular tax-saving instruments among investors. Not only can you save tax but also earn some decent returns over the investment horizon.
Fund houses invest at least 80% of total assets into equity or equity-related instruments. You can invest any amount in ELSS funds. However, you are only eligible to get tax deductions on a maximum of 1.5 lakhs of the total invested amount.
On top of that, you can also get tax benefits on long-term capital gains of less than 1 lakhs.
PPF is another popular investment avenue among Indian households as it’s a government-backed fixed-income scheme. You can build wealth over the years and save tax on the PPF amount.
You can create a PPF account in a bank or in a post office depending on your convenience. Government announces the interest rate on PPF each year which remains the same for that year.
You can invest from Rs. 500 to 1.5 Lakhs in a financial year to get tax exemption under section 80C of the IT Act. The interest earned is also exempt from tax.
Though the lock-in period for the PPF amount is 15 years, you can withdraw the partial amount in 5-year intervals or get a loan against that amount. Read more about PPF here.
Tax Saver Fixed Deposit is a tax-saving FD under section 80C of the IT Act with a lock-in period of 5 years. Individual or joint account holders can create this FD to get tax benefits.
For joint accounts, only the first holder is eligible for tax benefits.
If you are planning to create FD, go with a tax saver FD scheme. Please note that any premature withdrawals may compromise your tax benefits. Read the scheme terms carefully before creating the FD.
Post-retirement financial security is one of the important decisions one has to make. If you already don’t have a retirement plan, you must create one to safeguard your future.
National Pension System/Scheme can be beneficial for you to build retirement funds and save taxes. It’s a systematic investment policy where both employees and employers can invest funds. You can save tax on up to 1.5 lakhs of the total amount under section 80C of the IT Act.
Additional Tax Benefits Over and Above 80C: Salaried employees can also save tax on up to 50,000 under section 80CCD(1B) of an IT act. Employees become eligible to get tax exemption by investing up to 10% of their salary into NPS. Self-Employees can get tax benefits of an additional 50,000 under 80CCD(1B) by investing 20% of their annual gross income.
Similar to PPF, NSC is also the safest investment where you can earn interest and gain tax benefits.
NSC is a fixed-income investment scheme available to purchase at any post office branch. With 5 years lock-in period, it offers returns nearly similar to FDs.
You have to invest atleast 1000 in NSC. Though there is no maximum investment amount threshold, you can only get tax exemption on up to 1.5 lakhs under 80C of the IT Act.
Individuals who have purchased life insurance are eligible for tax exemption of up to 1.5 lakhs of the total premium paid under section 80C of the IT act.
The amount on maturity or the amount the nominee gets after the passing of the policyholder is also tax-free.
If you are also paying for your family’s and parent’s health insurance, then you are eligible for tax benefits under section 80D of an IT act.
Here’s how it works:
| Healthcare Insurance Covered Individuals | Yourself + Spouse + Children | Your Parents | Total Tax Exemption Under 80c |
| Yourself, spouse, children (< age 60) + parents (< age 60) | 25,000 | 25,000 | 50,000 |
| Yourself, spouse, children (< age 60) + parents (> age 60) | 25,000 | 50,000 | 75,000 |
| All covered individuals (> age 60) | 50,000 | 50,000 | 1,00,000 |
As the name suggests, the scheme is beneficial for senior citizens. By investing up to 15 lakhs in SCS policy, senior citizens can get tax exemptions of up to 1.5 lakhs.
The eligibility criteria for the SCSS:
The Central Government of India determines the interest rate on the SCS scheme, making it safer to invest in.
Section 80C of the IT act is the most popular tax-saving act. Any one or a combination of the options mentioned above can help you get tax exemption on up to 1.5 lakhs in a financial year.
For working individuals, we would recommend ELSS mutual funds or PPF. Starting an ELSS SIP can help you build wealth as well as save tax.
PPF has some great advantages as you gradually save for a longer duration. It offers a higher interest rate than FD or saving account.
Choose what fits best for your financial goals. Or you can always reach out to our advisors for more guidance and portfolio analysis.
