This is the time of the year when a lot of individuals invest in various instruments to save taxes. Also come April, every single tax payer will plan for the instruments that will help him in saving on the tax outflow. The fact also remains that one would want to invest in instruments that would not only help in tax reduction but also facilitate growth in wealth. After all attaining financial freedom is the sole objective that would be followed by one and all.
A good investment is akin to erstwhile mindset of investing into gold that not only grows over time but can also be used as a collateral for loan against gold in case the need arises.
Public Provident Fund
Popularly known as PPF, this is a fantastic option for one and all. It comes with two validity periods viz. 15 years and 7 years. One can invest complete amount eligible for exemption under section 80C (currently the limit is of Rs 150,000) every year. The minimum amount that needs to be invested every year is Rs 500 only. So the investment gives a lot of flexibility to investor on the amount that he can deposit. It also comes with the flexibility of investing every month or lump sum once a year. The fact that the interest is paid every year and becomes part of the investment that earns further interest, one can see the invested amount growing over years.
Employee Provident Fund
Unlike PPF, regulations are set out by the government of India on the minimum threshold on EPF. However, the employee can chose a higher percentage of the basic salary than the prescribed minimum percentage. The money invested in this scheme is also eligible for exemption under section 80C. The government declares the interest paid on the deposited amount and this investment generally grows to a substantial amount at the time of retirement.
Equity linked savings scheme
The ELSS schemes provide the investor with both an exposure to equity through mutual funds and are topped up with the benefit of tax savings. These are specific investments and are flagged off as ELSS by the fund houses. These also provide tax exemption up to Rs 150,000 under section 80C but come with a lock in period of 3 years. Means that the invested amount cannot be withdrawn for 36 months from the date of investment. However, the investor can opt for regular dividend payout if there is a need as against the growth scheme where the dividend gets further invested
Sukanya Samridhi Yojna
Under the “Beti Padao, Beti Bachao” scheme of the government of India, one can open an account and claim tax rebates for the money invested. This account can be opened in the name of the girl child immediately upon the birth until completion of 10 years of age. The money from Rs 1,000 to Rs 150,000 can be deposited in the account per year. The account shall be active for 21 years from the date of opening or marriage of the girl (after 18 years) whichever is earlier.
Life Insurance plans
There was a time when people would mostly buy a traditional life insurance plan for savings. While this is a wrong strategy, the life covers do come with some returns as well and the premium paid is eligible for tax deduction. Investing into insurance while may not give as much returns if compared to other investment options but it is a must for one and all.
Medical Insurance Plans
Medical is quite expensive. One should also invest into the medical insurance cover. A small investment every year will save a lot of cost if a need arise. Any amount invested up to Rs 25,000 is exempted under section 80D of IT Act.
Tax saving fixed deposits
Then there are some deposits with banks as well that can help in saving taxes. These are just like any other deposit with the bank. The only difference is that one cannot liquidate the deposit before the maturity date.
Property is a great investment. And given the ease and affordability of the home loan, one can invest into this. The home loans entitle the borrower to get tax sops on both the interest and principal amount paid to the lending institution. The principal amount up to Rs 150,000 is exempted under 80C and even the interest of up to Rs 2,00,000 entitles the borrower for the tax reduction. If one checks the free CIBIL report and has a good score, he can even negotiate a better price from the housing finance company.
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