New Delhi: Saving money on taxes doesn’t have to be difficult. By making smart investments in tax-saving products, you can lower your tax bill and secure your financial future with a lot of savings. There are various ways for taxpayers to reduce their tax obligations under Section 80C and other sections.
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These investments may help lower your taxed income. As a result, you have the opportunity to build wealth over time.
What Are Tax-Saving Methods?
Tax saving can be broadly categorized into two main avenues: expenses and investments. While deductions for expenses like tuition fees, rent, and medical expenses are common, strategic investments play a significant role in reducing tax liability.
Top Tax-Saving Instruments
Let’s explore some of the most effective tax-saving investment plans that offer both financial benefits and portfolio diversification opportunities:
Equity Linked Savings Scheme
ELSS stands out as an attractive option, offering potential high returns by investing primarily in equity securities. With a mandatory lock-in period of three years, ELSS qualifies for tax exemptions under Section 80C of the Income Tax Act, providing investors with a maximum tax exemption of Rs. 1.5 lakh.
Public Provident Fund
Backed by the Central Government, PPF is a tax-efficient investment plan favored by many salaried individuals. Contributions to PPF accounts are eligible for tax deductions under Section 80C, with a deduction limit of Rs. 1.5 lakh. PPF accounts offer the added benefits of tax-free returns and no wealth tax.
National Pension Scheme
Similar to PPF, NPS operates as a systematic investment system with the EEE (Exempt-Exempt-Exempt) status. Contributions to NPS qualify for tax exemptions, and withdrawals are tax-free, making it an attractive long-term investment option.
Unit Linked Insurance Plan
ULIPs offer a dual benefit of insurance coverage and investment opportunities. Premiums paid towards ULIP policies are eligible for tax deductions under Section 80C, and returns on maturity are tax-exempt under Section 10(10D).
Senior Citizen Savings Scheme
Designed specifically for senior citizens, SCSS allows for tax deductions on investments up to Rs. 1.5 lakh. With a maximum investment limit of Rs. 15 lakh and returns backed by the Central Government, SCSS presents a low-risk investment avenue for retirees.
Sukanya Samriddhi Yojana
Targeted towards empowering girl children, SSY offers attractive interest rates and tax benefits.
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Parents can open SSY accounts for daughters below the age of ten, with tax benefits extending up to Rs. 1.5 lakh per annum.
