It is that time of the year again when you have to start thinking about paying taxes. If you already have invested in instruments that help save tax, you can start reaping their benefits. However, if you have not yet considered such options, it is the right time to take the initiative.
Here, we guide you on where to invest money to avail of tax benefits.
- Unit–Linked Insurance Plans (ULIPs)
A ULIP is a life insurance policy that also provides the option to invest in equity and debt funds. Section 80C of the Income Tax Act, 1961 allows you a yearly tax deduction of up to INR 1.5 lakh on the premium paid. ULIPs initiated before February 1, 2021, also have tax-free maturity proceeds under Section 10 (10D). However, the maturity benefit of the policies bought on or after February 1, 2021, attracts 10% long-term capital gains (LTCG) if the annual premium is over INR 2.5 lakh.
You must remember that the Section 80C benefit is available only if your yearly premium is not over 10% of the ULIP’s sum assured.
- Equity-Linked Savings Scheme (ELSS)
ELSS offers good returns by investing your capital in stocks. With ELSS, you can create a fortune over an extended period. You can enjoy a tax deduction of up to INR 1.5 lakh under Section 80C on the invested amount.
- Public Provident Fund (PPF)
PPF is a government investment avenue, which makes it a safe alternative for you. It offers decent returns over its 15-year duration. The returns earned on PPF are tax-free. You can also get a tax deduction of up to INR 1.5 lakh yearly on your invested amount under Section 80C.
- Sukanya Samriddhi Yojna
This is among the investment options you should consider if you have a daughter aged under 10. You can ensure her economic future by investing in this scheme. Section 80C of the Income Tax Act, 1961 makes the investment tax-deductible up to INR 1.5 lakh every year. Moreover, the earnings are tax-free. However, you cannot invest in Sukanya Samriddhi Yojna for more than two daughters.
- Life insurance policy
A life insurance plan is a must-buy for everyone who has dependent family members. You can ensure the financial security of your loved ones in your absence with such a policy. The premium is tax-deductible up to INR 1.5 lakh yearly under Section 80C. However, your sum assured has to be 10 times your annual premium for you to be eligible for this benefit.
- National Pension System (NPS)
This is a government pension scheme that allows you to build a substantial corpus. The policy allows a yearly tax deduction of up to INR 1.5 lakh under Section 80C. Additionally, Section 80CCD (1B) of the Income Tax Act, 1961 offers another tax deduction of INR 50,000.
- National Savings Certificate (NSC)
If you want a low-risk investment instrument to grow your money, NSC is the right choice. It also provides a tax deduction of up to INR 1.5 lakh under Section 80C.
- Fixed deposit (FD)
A five-year tax-saving FD is among the popular investment options in India. Section 80C makes the investment tax-deductible up to INR 1.5 lakh.
- Savings account
This is a safe option to save money and enjoy tax exemptions. The interest is tax-deductible up to INR 10,000 for people aged under 60. Senior citizens can enjoy a tax deduction of up to INR 50,000.
- Senior Citizen Savings Scheme (SCSS)
This is an ideal investment option for retired individuals that provides regular returns. The invested amount is tax-deductible up to INR 1.5 lakh under Section 80C.
- Term insurance
This is a pure form life insurance policy that offers only a death benefit without any maturity returns. The premium paid is tax-deductible up to INR 1.5 lakh under Section 80C. Additionally, the death benefit is tax-free.
Now that you know about the options for tax saving investments in India, it is time to plan your finance accordingly. With these, you can earn profits and also save money with tax benefits.