We often procrastinate our tax saving investments till the last minute, but it is always wise to start the tax planning early in the year. Individuals can save up to 1.5 lakhs under Section 80C if invested in right investment avenues. Here are 5 investments that one can make to save tax and also multiply their capital.
A smart investor chooses to invest in tax saving investments to save taxes and grow their capital and safeguard the financial status of the family. The investments are also helpful to meet the family’s financial dreams and accumulate corpus for retirement.
Best Tax Saving Investments Under Section 80C are:
Public Provident Fund:
PPF is one of the most popular investments in the country that helps tax savings without any credit risk. The interest rates are subjected to change after quarterly review and are linked to government securities. PPF funds have a 15 year old tenure, which can be extended by 5 years. PPF funds also have a partial withdrawal scope under certain terms and conditions.
Along with tax saving investment, this also enables to build a corpus for retirement. The interest earned and the maturity proceeds are also exempt from taxes, which makes PPF funds enjoy the status of triple exemption or EEE (Exempt, Exempt and Exempt).
National Pension Scheme (NPS):
The National Pension Scheme helps in tax exemption under different Section of Income Tax Act.
- Under Section 80C taxpayers can claim a maximum of 1.5Lakhs for Tax Exemption
- An additional deduction of Rs. 50,000 can be claimed under Section 80 CCD
- In case if the employer contributes 10% of the basic salary the amount is not taxable
One can start an investment in NPS from as low as Rs.1000 but the amount can be withdrawn only after retirement unless some specific situations. Under National Pension Scheme, one needs to mandatorily invest 40% of the corpus in the annuity plan which will be paid out as monthly income.
At the time of maturity only 40% of the amount is tax exempted and the rest is taxable. The annuity amount that is paid out monthly after retirement is fully taxable.
Unit Linked Insurance Plan (ULIP):
ULIPs are popular for not only providing tax benefits but also dual benefit of insurance and investment. The returns on investment are significantly high if invested for a long period. The premium paid towards the plan is tax exempted under Section 80 C of the Income Tax Act.
However, the ULIP plans come with a lock-in period of 5 years though investors can choose to keep the amount invested for a longer period to reap benefits of higher returns.
The investments on ULIPs are depended upon the market and investors can choose to switch between the funds within a year to maximise their returns.
National Savings Certificate:
NSC is a tax saving investment that can be opened at any post-office and is considered a low risk investment option. This is the best investment scheme for mid-income investors who wish to invest as well as save on taxes.