What Are The Different Tax Saving Investments In India?

Investment is a must in every person’s financial portfolio. This not just helps you to keep your earned income safe but also engage it to be lucrative. Everyone aims to invest smartly by saving tax that is allowed under Section 80C and 80CC under Income Tax Act of India. Many people get into the investment market to enjoy the benefit of tax saving. But there are many who are still sceptical to enter the investment market because of the risks associated with it and fluctuating returns.

The tax saving season in India starts from 1st of April and this is for both salaries and non-salaries classes. If you want to invest and save tax, then you must lookout for investment avenues that offer tax exemption benefits specifically along with the other benefits. One of the pro tips to keep in mind is to start saving in the early quarter of the tax financial year. This gives you enough time to plan and invest smartly to reap maximum returns on investments.

While choosing an investment plan that comes with tax saving investments benefits, you must check for other factors as well such as returns, liquidity and safety. Investment involves your hard-earned money, and at any cost you would not want to let that money go in unsafe hands or in loss. To be assured that you enjoy both benefits as well as tax exemptions, you need to select a plan smartly with enough research before making a decision. Here is a list of few best of the tax saving investments options that will help you in making investment easier.

  1. Equity Linked Saving Scheme (ELSS) Mutual Fund – The Equity Linked Savings Scheme is popular for two of its major features that are tax exemption that is of ₹1.5 Lakh under Section 80C of the income Tax Act and second is the funds invested in ELSS has a lock-in period of 3 years. It comes with an attractive rate of interest of 15% – 18%. Though the one minus part is that returns on investment are based on fund’s market performance and hence keep fluctuating. To be at lower risk and get good returns over a long-term, the investor can diversify the investment across different ELSS schemes depending on the industry exposure.
  2. National Pension Scheme (NPS) – National Pension Scheme or NPS is one of the most popular tax saving investments schemes in India and comes with various tax benefits. The tax benefits offered under the NPS scheme can be classified into three categories. First is the share of up to the maximum limit of ₹1.5 Lakh can be claimed for tax exemption under the Section 80C of the Income Tax Act. Second is that under Section 80CCD (1b), the investor can get additional deduction of up to ₹50,000. Third one is that in case 10% of the basic salary of the investor is contributed by the employer towards the National Pension Scheme, then the amount is exempted from tax. These tax benefits have made NPS popular amongst the investors planning for steady income after retirement.
  3. Unit Linked Insurance Plan (ULIP) – ULIP scheme when introduced were not accepted by many investors, but Insurance Regulatory and Development Authority of India (IRDAI) made changes in the scheme, and today ULIP scheme comes with zero premium allocation and administration fees, which has made it a hit amongst the investors aiming for tax benefit and get high returns on investment over long term. ULIP comes with double benefit of insurance and investment, also adding to this an investor can get benefit of taxability of income on the premiums paid towards the insurance plan in ULIP under Section 80C of the Income Tax Act. Moreover, the return on investment also get tax benefit under Section 10 (10D) of the Income Tax Act.
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