As a salaried employee, you are liable to pay taxes on the income earned, and sometimes the taxes may take up a substantial amount of your useable liquid cash. Read on to know about tax-saving investment options.
Tax-saving is an integral part of financial planning. As a citizen of India, you are obliged to pay taxes. But, there are ways to help reduce your tax payment, and one of the best ways is to invest in various tax-saving investment schemes. Here are a few investment schemes that you can consider for reducing your tax liability.
NPS – National Pension Scheme
Touted as one of the best tax-saving schemes in India, NPS is an excellent savings-cum-investment option that allows you to secure your old age. Under the scheme, you can contribute a small amount until you attain the retirement age and post-retirement, you can draw a monthly pension. Besides, your contribution towards NPS account is eligible for a tax deduction.
If you are a salaried employee, you can get a tax benefit up to 10% of your salary under Section 80CCD(1) of the Income Tax Act. The deduction is subject to the overall tax deduction limit of Rs. 1.5 lakhs under Section 80CCE. Besides, you can claim a deduction on the employer’s contribution towards NPS up to 10% of the salary (Basic Salary + DA). The deduction is over and above the deduction under Section 80CCE.
FD – Fixed Deposits
Bank Fixed Deposits are one of the most popular tax-saving investments in India. A lot of people in India prefer investing in FDs not just to save taxes, but it also one of the safest investments; it offers guaranteed returns. But, to avail tax benefit, you must comply with the lock-in period rules; you must deposit your money for a minimum of five years. You can avail tax benefit to a maximum limit of 1.5 lakh Rupees under Section 80C of the IT Act.
Insurance protection is essential for all. You must invest in a robust life insurance policy as well as a health care plan to keep you and your family protected from all kinds of health and life risks. The premium you pay for life insurance is eligible for deduction up to a maximum limit of Rupees 1.5 lakhs under Section 80C. The tax benefit for health insurance premium is covered under Section 80D, and the maximum deduction you can get is Rs. 25,000.
ULIP – Unit-Linked Investment Plan
ULIP is another excellent investment option that provides you with the triple benefit of insurance protection, returns on investment and tax deduction. A portion of the premium is used for offering life cover, and the other part is invested in various investments schemes to help investors get valuable returns. You can get a tax benefit for the premium paid towards ULIP under Section 80C, and the returns earned from it are exempted from tax under Section 10(10D).
PPF – Public Provident Fund
This is another excellent tax saving investment that everyone must have in their portfolio. It is a long-term savings scheme that allows you to create a corpus for your post-retirement life. In terms of tax savings, PPF enjoys EEE (Exempt, Exempt, Exempt) status. This means that the amount you contribute towards your PPF account, the interest earned and the maturity proceeds you receive at the end of the investment tenure are all exempted from tax. Hence, experts recommend PPF as one of the best tax-saving invest instruments.
So, while choosing the best tax saving investment, make sure that you don’t consider only the tax-saving aspect, but you must consider your long-term goals too. You can invest in more than one of the schemes mentioned above to save tax as well enjoy returns on your investment.