Navigating tax-saving investments in India
What's the story
Every year, as the fiscal year concludes, taxpayers in India rush to make investments that can save them taxes.
Navigating the various tax-saving options available under Section 80C of the Income Tax Act can seem complex.
This article aims to simplify this complexity, guiding you through different investment avenues.
These not only help in saving tax but also in growing your wealth over time.
Tip 1
Equity-Linked Savings Scheme (ELSS)
Equity-Linked Savings Schemes (ELSS) are mutual funds that primarily invest in equities.
They feature a three-year lock-in period, which is shorter than many other Section 80C options.
Investing in ELSS offers dual benefits: the potential for high returns due to equity exposure and a tax deduction up to ₹150,000.
However, investors should note that these returns are subject to market risks.
Tip 2
Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a top long-term saving-cum-tax-saving option in India, offering interest rates set quarterly by the government.
With a 15-year lock-in period, both the interest and principal are tax-exempt under Section 80C.
Its secure nature and attractive interest rates make PPF an excellent choice for those seeking steady and safe financial growth.
Tip 3
National Pension System (NPS)
The National Pension System (NPS) is aimed at providing retirement income and offers an additional avenue for tax savings beyond the ₹150,000 limit under Section 80C.
Contributions up to ₹50,000 toward NPS are eligible for an additional deduction under Section 80CCD(1B).
It invests in equities and fixed income instruments, and allows investors to choose their asset allocation based on their risk appetite.
Tip 4
Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana is for parents with girl children, offering high interest rates.
It runs until the child turns 21 or marries after 18.
Investments in SSY are deductible under Section 80C and have EEE status, meaning they're exempt at investment, earnings, and withdrawal stages.
This scheme is ideal for securing a girl child's future while saving on taxes.