Top 10 Tax Saving Investments in India:
Following are the top 10 Tax Saving Investments in India. You can select your Investment according to your Investment goals:
1) Unit Linked Insurance Plan (ULIP): ULIP or Unit Linked Insurance Plan is a type of insurance that combines the benefits of protection, savings & tax benefit in a single plan. The main advantage that a ULIP has over traditional wealth creation tools is the benefit of a Life Cover. As a result, your money can grow, and at the same time, your loved one’s future is protected from life’s unexpected twists.
A ULIP has the benefits of both an insurance policy and an investment. The policy specifies a death benefit.The amount that will be paid to the nominee if the policyholder dies during the ULIP term. Additionally, if the policyholder survives the ULIP term, they can also obtain the ULIP expiration value. This will be the amount generated by ULIP’s investments in capital or debt market. The policyholder can generally choose ULIP funds and asset classes to generate these returns. This is the investment component of a ULIP.
2) Life insurance Policy: Under section 80C of Income Tax in India, a premium paid on a life insurance policy is deductible based on income tax calculations. The total amount allocated to premium payments must not exceed Rs. 1.5 Lakh to take advantage of this tax exemption benefit.
3) Health insurance Policy: Under section 80C, a premium paid in Health insurance Policy is deductible based on income tax calculations. The total amount allocated to premium payments must not exceed Rs. 1.5 Lakh to take advantage of this tax exemption benefit. Health insurance premium up to Rs.25000/- & for senior citizens upto Rs.30000/-will be subject to tax deductions.
4) New Pension Scheme (NPS): The National Pension Plan is a systematic investment policy whose objective is to provide financial security to investors at retirement. It is one of the best investments to save taxes under Section 80C, with a claim deduction of up to Rs. 1.5 Lakh in the total amount of the principal. The national pension plan accepts funds from employers and employees in the case of salaried individuals.
5) Public Provident Fund (PPF): The Public Provident Fund (PPF)is one of the best instruments to save tax under section 80C , sponsored by the Government of India. However, PPF comes with a mandatory 15 year lockout period.
The PPF interest rate obtained in this tax saving instrument is announced by the government every quarter and remains fixed during the given period.
A maximum of Rs. 1.5 Lakh can be invested in a PPF account in a financial year, through a lump sum or monthly investments. The full amount is exempted from tax making it one of the best investments to save taxes under Section 80C. Any interest earned on the amount of an investment is also not considered for tax calculations.
ALSO READ: Tax Saving Schemes for Senior Citizens in India
6) National savings certificate (NSC): The national savings certificate aims to provide a safe investment to people who are suspicious of fluctuations in the stock market. The tax saving benefits under this policy is up to Rs. 1.5 Lakh on the principal amount and the reinvested amount of interest. The maturity period of this investment remains fixed at five years and ten years and it is up to the investor to choose between any of the two periods. NSC is a fixed deposit scheme & it is available in Post Office.
7) Equity Linked Savings Schemes (ELSS): The equity-linked savings scheme (ELSS) is one of the most popular market investment tools among investors with the primary goal of saving taxes. It is one of the best ways to save taxes under section 80C, as well as make substantial profits by taking advantage of the market.
ELSS tax savings funds invest at least 80% of the total portfolio in equity securities, giving the highest return of any similar instrument available on the market. This scheme comes with a mandatory three-year blocking period on an investment amount. Under section 80C, the following provisions are made to ensure a substantial tax reduction on funds related to the ELSS scheme.
The total amount of capital invested in ELSS is exempt from tax, as long as the amount is under Rs. 1.5 Lakh.
8) Sukanya Samriddhi Yojna (SSY): Sukanya Samriddhi Yojna is one of the best ways to save taxes under section 80C of the Income Tax Act. Sukanya Samriddhi Yojna tax benefits amount to Rs. 1.5 Lakh per year. However, an account under Suaknya Samriddhi Yojna can only be opened by a person who has a daughter under the age of ten years.
9) New Pension schemes (NPS): The National Pension Scheme (NPS) is a systematic investment policy whose objective is to provide financial security to investors at retirement. It is one of the best investments to save taxes under Section 80C, with a claim deduction of up to Rs. 1.5 Lakh in the total amount of the principal.
10) Tax Saving Fixed Deposits (FD’s): Fixed deposits (FD)with a fixed maturity of five years are eligible for tax exemptions under Section 80C. It is one of the popular investment tools among people with risk aversion, since it guarantees guaranteed returns at a fixed interest rate. Tax Saving Fixed Deposits has a minimum lock in period of 5 years.