As an Indian taxpayer, it is important to be aware of the various tax saving options available to you. By investing in these options, you can not only save on taxes but also grow your wealth over time. Here are some of the most popular tax saving options in India:
Public Provident Fund (PPF)
PPF is a government-backed savings scheme that offers a tax-free interest rate of 7.1% per annum (as of April 2021). The investments made in PPF are eligible for tax deduction under section 80C of the Income Tax Act. The minimum investment is Rs. 500 per year and the maximum is Rs. 1.5 lakh per year.
Equity Linked Saving Scheme (ELSS)
ELSS is a type of mutual fund that invests in equity shares of companies. It offers tax benefits under section 80C of the Income Tax Act and has a lock-in period of 3 years. ELSS is a high-risk investment option but has the potential to offer higher returns compared to other tax saving options.
National Pension System (NPS)
NPS is a government-sponsored retirement savings scheme that allows individuals to invest in a mix of equity, corporate bonds, and government securities. The contributions made towards NPS are eligible for tax deduction under section 80CCD of the Income Tax Act. NPS has a lock-in period till the age of 60.
Tax-saving fixed deposits
Tax-saving fixed deposits are offered by banks and post offices and have a lock-in period of 5 years. The investments made in tax-saving fixed deposits are eligible for tax deduction under section 80C of the Income Tax Act. The interest earned on these deposits is taxable.
Unit-linked Insurance Plans (ULIPs)
ULIPs are a type of insurance plan that offer both investment and insurance benefits. The investments made in ULIPs are eligible for tax deduction under section 80C of the Income Tax Act. ULIPs have a lock-in period of 5 years.
Senior Citizens Savings Scheme (SCSS)
SCSS is a government-backed savings scheme for senior citizens (aged 60 years and above). It offers a fixed interest rate of 7.4% per annum (as of April 2021) and has a lock-in period of 5 years. The investments made in SCSS are eligible for tax deduction under section 80C of the Income Tax Act.
In conclusion, there are various tax saving options available for Indian taxpayers. It is important to evaluate each option carefully and choose the one that best suits your financial goals and risk appetite. Additionally, it is advisable to consult a financial advisor before making any investment decisions.
