There are infinitely many tax-saving solutions prevailing in the Financial Market which would aid you in saving tax. A tax-saving investment which as an investor you want to do must be done after carefully analysing all the solutions and then choose the best one which would help you in accomplishing your financial goal successfully.
Under Section 80 C of the Income Tax Act, you can invest ₹ 1, 50,000 annually in any of the tax saving solutions available and accordingly claim tax benefit. It is noteworthy to mention here that Under Section 80 C of the Income Tax Act, Tax-Saving investment made during a particular financial year can be claimed as a deduction for that particular financial year only. Let’s go through the various tax saving solutions under Section 80 C of the Income Tax Act which could help you in saving tax by investing ₹ 1.5 lakh and then claim deduction:
- Life Insurance – It is mainly bought with the sole purpose of protecting one’s family. One can save tax under Section 80 C and also a product like ULIP (Unit Linked Insurance Plan) provides investors both insurance and investment under a single integrated plan.
- Equity Linked Savings Scheme (ELSS) – Investing in ELSS mutual funds in addition to saving taxes, would also give you capital appreciation which ultimately helps you in fulfilling your long-term financial goal. Schemes mentioned under this category have got the least lock-in period of three years only. The returns are market-linked and not guaranteed.
- Bank Fixed Deposits (FD) – Bank Fixed Deposits safe and guaranteed returns and is eligible for tax saving only if it’s taken for a term of 5 years.
- National Pension System (NPS) – NPS has been designed to provide one with a lump-sum amount in addition to a regular income once a person retires. Under his/her NPS account a person can invest up to ₹ 2, 00,000 and could save tax for up to nearly ₹ 62,000 in the highest tax bracket.
- Public Provident Fund– Public Provident Fund (PPF) serves as the best investment solution in case you desire to accumulate funds for your retirement. Exempt-Exempt-Exempt (E-E-E) benefit could be availed by investing in PPF. PPF has got the highest lock-in period of 15 years among various tax saving avenues. Since investment made under PPF account is not seized by any court, so it becomes one of the safest options for any individual to invest their money.
- National Saving Certificate (NSC) – There is no limit for making your investment under this scheme and is also eligible for tax deduction. This Certificate could also be used as collateral to avail loan from banks.
- Senior Citizen Saving Scheme (SCSS) – For senior citizens who have crossed the 60 years mark, it is undoubtedly the best tax saving solution. The maturity cycle in this scheme is 5 years and can be further extended for a period of 3 years if required.
So these were some tax-saving solutions in the financial market which would help you in knowing how much you need to invest in order to have maximum savings on the tax you owe.