Tax-saving investments are crucial for everyone. They not only offer tax saving under Section 80C and 80CCC of the Income Tax Act of India – but also act as long term / retirement savings.
Are you planning to invest for the FY 2021-22? Still not finalized the financial products to invest in? Here are top saving investments options which you can consider to reduce your tax outgo for the year.
A government-guaranteed investment option - Public Provident Fund or PPF provides fixed returns along with tax benefits under section 80C. Individuals can open a PPF account at a bank or at a post office. It has a locking period of 15 years, however, one can extend the duration of the account by a block of 5 years.
NPS or the National pension scheme is a government-sponsored pension scheme. Launched in January 2004 by the Pension Fund Regulatory and Development Authority of India (PFRDA), the scheme encourages people to invest in a pension account at regular intervals during the course of their employment. On retirement account holders can withdraw a part of the corpus. The individual will receive the remaining amount as a monthly pension post-retirement.
Similar to FD and PPF, the NSC is considered a low-risk tax-saving investment option. Backed by the Government of India - NSC offers a guaranteed return on investment. You can invest in this short-term investment plan via the nearest post office in your name or as a joint account with another adult individual.
A mutual fund is a simple, tax-efficient, and effective tool to invest in. Mutual Funds Company usually pool money from various investors and invest that money in securities such as bonds, stocks, and short-term debt.
Equity-Linked Saving Scheme (ELSS), commonly referred to as the tax-saving funds, falls under the diversified category of mutual funds. ELSS is covered under the Section 80C provisions and therefore, you can claim tax deductions of up to Rs 1,50,000 a year. This scheme has a mandatory lock-in period of 3 years. You can either invest in lumpsum or in small amounts e.g. SIP.
Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI), hence, your investment is safe.
When you make an investment in ULIP, the insurance company invests part of the premium in shares/bonds, etc., and the balance amount is utilized in providing an insurance cover. Hence, ULIP is both an insurance policy and an investment. It provides life insurance cover, investment opportunities, and tax-saving benefits under section 80C of the Income-tax act. The minimum locking period is 5 years. With regular premium payments, you can enjoy the benefits of wealth creation for your loved ones.
Many risk-averse individuals utilise the tax-saving FD accounts. Such deposits gain tax deduction under section 80C of the Income Tax Act, 1961. The minimum tenure for a term deposit under Tax Saving Scheme is 5 years. You can get a tax exemption of a maximum of Rs.1.5 lakh.