Best Tax Saving Options Available for Investment

Introduction

Tax planning is an important element and is as important as tax saving.

One needs to manage their portfolio well in order to reap maximum possible tax benefits from their investments.

Read more to understand what kind of investments shall help you reap maximum tax benefits.

Types of Investments for tax-saving

There are a number of tax-saving plans available out of which a few are mentioned below:

1.      Life Insurance

2.      Health Insurance

3.      National Pension Scheme

4.      PPF

5.      SIP and Other Mutual Funds

6.      Endowment policy

Life Insurance

Though not the purest form of investment, life insurance manages to yield dual edge benefits. It helps you get a life cover and acts a financial alliance when needed under emergency.

 Health Insurance

Although health insurance doesn’t reap any returns unlike other forms of financial investments, it still has a larger value and is worth the investment compared to other forms of insurance and saving plans.

Section 80D of The Income Tax Act states that an individual can enjoy tax exemption on premium paid for a health insurance plan.

The upper limit of tax exemption is Rs. 25,000 for the insured person and extends up to Rs. 30,000 for senior citizens.

An individual investing in a health plan for self as well as their parents gets to enjoy a deduction of up to Rs. 25,000 on his taxable income for the annual year.

Mutual Funds         

Equity Linked Saving Schemes and Mutual funds were specifically designed for tax saving purposes.

Although, ELSS are a high risk product as they are market linked, they have potential for higher returns.

ELSS as well as ULIP are considered as the two tax saving equity based financial investments.

The investment also has the shortest lock-in period of 3 years.

National Pension Scheme (NPS)

One of the fewest investment options that lets you surpass the 1 lakh INR tax deduction under Section 80C of Income Tax Act, 1961 is National Pension Scheme (NPS).

Under the NPS scheme, the individual enjoys a tax deduction of up to maximum 10% of their basic salary.

Public Provident Fund

PPF or Public Provident Fund is issued by the central government and is a long term savings plan.

Not only the money you invest in PPF is exempt from tax under Section 80C, the interest you earn on the PPF investment is also exempt from tax.

The maximum amount eligible for deduction through permissible investments under 80C of the Income-Tax Act is Rs. 1.5 lakh.