Smart tax saving investment
Every year, when the time comes to file the Income Tax Return (ITR), the biggest question that arises is how to save tax?
The government has given many such options where, by investing, not only is the money safe and grows, but you also get relief in tax.
ELSS (Equity Linked Savings Scheme)
This is a type of mutual fund in which money is invested in the stock market.
- In this mutual fund, under Section 80C, you can get tax exemption up to ₹1.5 lakh.
- Its lock-in period is only 3 years, which is less compared to other options.
- Returns can be around 10% to 15% (depending on the market).
This is good for youngsters and those who want long-term growth.
PPF (Public Provident Fund)
This is the most popular and safe investment option.
- The interest is decided by the government (around 7%–8%).
- Its lock-in period is 15 years, but partial withdrawal is possible in between.
- Under Section 80C, you get tax exemption, and the maturity amount is also tax-free.
This is best for those who want risk-free and long-term safe investment.
NPS (National Pension System)
This is specially designed as an investment option for retirement planning.
- In this, investment is made in equity as well as debt instruments.
- Under Section 80CCD (1B), you get an additional tax benefit of up to ₹50,000.
- On maturity, you get benefits in the form of pension.
This is best for salaried individuals and for those who want retirement planning.
FD (Tax Saving Fixed Deposit)
Tax-saving fixed deposit is a special type of fixed deposit that allows individuals and Hindu undivided families.
- Fixed made in a bank, which has a lock-in of 5 years.
- Under Section 80C, you get tax exemption up to ₹1.5 lakh.
- The interest rate is around 6% to 7%.
- Interest earned on it is taxable, but the principal amount remains safe.
This is suitable for those people who want a safe and secure investment.
Life insurance premium
A life insurance premium is the regular payment you make to an insurance company in exchange for the financial coverage provided by a life insurance policy.
- If you take a life insurance policy, you get tax benefits.
- Under Section 80C, the premium paid is eligible for tax exemption, and under Section 10(10D), the maturity amount is completely tax-free.
- Along with providing financial security to your family, it also helps in tax saving.
Therefore, if you want family protection + savings, this is the best option.
Health Insurance
Health insurance is a policy that covers medical expenses incurred due to illness, accident or hospitalization.
- Tax saving benefits are also available on health insurance.
- Under Section 80D, you can claim a deduction of up to:
- ₹25,000 for premiums paid for yourself and your family.
- For parents who are senior citizens, an additional deduction of up to ₹50,000 is available.
This not only helps in saving tax but also provides financial security during medical emergencies.
Sukanya Samriddhi Yojana
This is a special government scheme for girls.
- Its interest rate is around 7% to 8%.
- Tax exemption is available under Section 80C.
- The maturity amount is tax-free.
This is good for parents who want to secure their daughters’ education and future.
Home loan
- If you buy a house, you get tax benefits on a home loan.
- Under Section 80C, an exemption of up to ₹1.5 lakh is available on the principal amount.
- Under Section 24(b), an exemption of up to ₹2 Lakh is available on the interest.
This tax saving, along with helping you save taxes, also fulfil your dream of owning a home.
NOTE: Investment should not be only for saving tax but also for wealth creation and financial security.
- If low risk and secure returns, you can opt for investments like PPF, FD, Sukanya Yojana, Insurance.
- If you want more growth and return ELSS and NPS are good.