Effective Ways to SaveTax
Taxes include an important part of our income. Everyone wants to save tax in order to lessen the burden of tax-paying. Here are some of the effective ways of tax saving which an individual can opt to pay less tax:
- Equity Linked Savings Schemes (ELSS) – For those who can take some risks, ELSS is the best option among all the investment options under Section 80C. It has many advantages over other options in many ways such as: ELSS funds are highly liquid and transparent. Among all the investment options in Section 80C, it is flexible as it has the shortest lock-in period of 3 years. In this option, an investor remains assured of his money and the returns are higher than other investments. The interest earned on these funds is tax exempt.
- Unit Linked Insurance Plans (ULIPs) – A very interesting feature of ULIPs is that it is very cheap as compared to other investment options. In this investment, you have the option to switch from equity to debt and vice-versa. These funds are flexible.
- National Pension Scheme (NPS) – National Pension System (NPS) offers a deduction of Rs. 50,000. People are required to invest at least 40% of the total amount in the NPS.
- Public Provident Fund (PPF) – Public Provident Fund (PPF) is a long-term saving scheme in which the individuals can invest by opening their PPF accounts in any banks/post office. It has a lock-in period of 15 years. The investment in PPF account is eligible for deduction under Section 80C. A maximum of up to Rs. 1.5 lakh can be claimed for deduction under this investment option. An advantage of this investment is that the interest earned after investing in PPF account is totally tax-free. It is safe as the government is responsible for the investment made in PPF accounts.
- Sukanya Samriddhi Scheme – This is a good investment option for the parents who want to invest for their daughters who are under 10 years of age. This account can be opened by just depositing Rs. 1000 in any post-office or any PSU branches. Under this scheme, the maximum investment that can be made in a financial year is Rs. 1.5 lakh for a period of 14 years. The account matures after the girl turns 21 but up to half of the amount can be withdrawn when the girl turns 18.
- Senior Citizens’ Saving Scheme (SCSS Account) – This investment scheme is available only for the senior citizens and is managed by the Government of India. The investment in this scheme can be made by depositing a minimum amount of Rs. 1000 in the SCSS account opened in the name of the person with any bank or post-office. It gives the maximum interest rate among all the investment schemes. It has a lock-in period of 5 years. The maximum amount that can be deposited in this scheme is Rs. 15 lakh. The TDS is applicable in case of SCSS and is deducted at the time of the interest payment but it can be avoided by filling Form 15H at the time of Income Tax Return Filing.
- National Saving Certificates (NSCs) – It is one of the most popular tax saving schemes. It can be issued from any post-office in India. It earns interest to the individuals who invest in the scheme and the interest rate is compounded half-yearly. The interest earned on this scheme is tax deductible under Section 80C and a maximum amount of Rs. 1.5 lakh can be claimed for deduction.
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