How to save tax is a question that bothers each one of us. While tax planning is important, tax saving schemes are also essential. You can save tax and earn returns with the tax saving plans. We have listed below the best tax saving plans in India.
Life Insurance
Life insurance plays an important role in the individual’s financial portfolio offering financial protection to the individual’s family in case of an eventuality
Life insurance, be it endowment or market linked ULIP, offers tax benefits to policyholders on the premiums paid. You can claim deduction from your taxable income on account of premium paid towards life insurance for self, spouse or children. You will be allowed a maximum deduction of up to Rs.1.5 lakh. The returns earned from Life Insurance policies are tax-free subject to conditions of Section 10(10D) of the Income Tax Act (1961)
National Pension Scheme (NPS)
NPS not only helps you plan for your retirement; it allows you to save tax at the same time. Whether you are looking for tax saving opportunities within 80C or beyond, NPS offers you both. The total tax deduction of ₹2,00,000 that can be claimed under Sections 80CCD (1), 80CCD (2) and 80 CCD(1B) can save an individual in the highest tax bracket up to ₹62,400 in taxes in a year.
Public Provident Fund (PPF):
Public Provident Fund (PPF) is one of the most popular long-term saving schemes in India. These are government-backed investments with a minimum lock-in period of 15 years. You can partially withdraw funds after 7 years and earn an interest of around 8%. The Public Provident Fund provides tax benefits under Section 80C of the IT Act, 1961. It allows income tax deductions up to Rs.1.5 lakh on the amount invested in the scheme.
Sukanya Samriddhi Yojana Scheme:
The Sukanya Sumriddhi Yojana Scheme is designed to provide great future for your girl child. The government backs this program as part of the “Beti Bachao, Beti Padhao Yojana” for the welfare of girls. It comes with an interest rate of 7.6% and tax benefits under 80C of Income-tax Act, 1961. You can invest a maximum of Rs 1.5 lakh annually in this government-backed scheme that is fully exempt from tax under section 80C.
Tax-savings Fixed Deposit:
ax saving deposits are a type of Bank deposit scheme that allows you to enjoy a deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. They come with a lock-in period of 5 years. It’s safer than equity investments in terms of risk and returns.
ELSS Mutual Funds
These are tax saving mutual fund schemes providing the twin benefits of tax saving along with high market-linked returns. Equity Linked Savings Schemes are mutual fund investment schemes that invest a large percentage of their portfolio in equity and the fund has a mandatory lock-in period of 3 years. which is the shortest amongst all the tax saving investment products. ELSS fund offers tax benefits of up to a maximum of Rs.1.5 Lakh under section 80C.
Health Insurance
Health insurance is one of the primary investments for any individual to ensure complete financial security during medical emergencies for themselves and their families.
Apart from the above, an additional deduction for the insurance of the parents is available to the extent of Rs. 25,000 if they are less than 60 years of age or Rs. 50,000 if they are more than 60 years of age. If the individual and the parent are both above 60 years of age, the maximum deduction available under this section will be Rs. 1,00,000.