The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act,Section 80C includes various investments and expenses you can claim deductions on – up to the limit of Rs. 1.5 lakh in a financial year.
| Investment | Returns | Lock-in period |
|---|---|---|
| 5-Year Bank Fixed Deposit | 6% to 7% | 5 years |
| Public Provident Fund (PPF) | 7% to 8% | 15 years |
| National Savings Certificate | 7% to 8% | 5 years |
| National Pension System (NPS) | 12% to 14% | Till Retirement |
| ELSS Funds | 15% to 18% | 3 years |
Apart from the 80C deductions, there are various deductions under Section 80 you can use to save on income tax. Tax benefits on health insurance premiums and home loan interest are a few.
The best time to start planning your tax-saving investments is at the beginning of the financial year. Most taxpayers procrastinate till the last quarter of the year, resulting in hurried decisions. Instead, if you plan at the start of the year, your investments can compound and help you achieve long-term goals. Remember, tax-saving should be an additional perk and not a goal in itself.
Use the following pointers to plan your tax-saving for the year:
This way, you can figure out how to exhaust the 80C limit. It is best to begin investing in the first quarter of the financial year so that you can spread the investments over the year. Doing this won’t burden you at the end of the year and will also allow you to make informed investment decisions.
Equity Linked Savings Scheme or ELSS are tax saving mutual funds where you can save up to ₹46,800 in taxes under Section 80C with a proven track record of consistent returns.
Health insurance protects you from unexpected and high medical costs in cases of emergencies to secure your future both health-wise and money-wise.
Health insurance protects you from unexpected, high medical costs. In case you or any family members covered under the policy is hospitalized, Health Insurance company will pay for the hospital expenses up to the cover amount (called sum insured) you have selected.
The medical expenses include room rent charges, doctor's consultation fees, surgery fees, nursing fees, cost of medicines, X-rays, ECG, MRI, Blood, Oxygen, etc. incurred during hospitalization of 24 hours or more.
Term Insurance provides cover for a fixed period of time during which, if the policyholder dies, the beneficiary is paid the selected cover amount (called sum assured). In case of your untimely death, term insurance ensures that your family doesn't suffer due to the loss of your income and protects their financial goals.
Term life insurance is a pure protection policy. In the case of the insured person's death during the policy period, the nominee gets the entire term insurance amount (sum assured) at one go. You can get term insurance at an extremely low cost, is easy to understand and you pay the same premium for the entire policy duration.
India's own Pension System to help you plan for a stress-free retirement. Get tax-free amount at maturity and a regular income after retirement, helping you sustain your current lifestyle.
National Pension System (NPS) is a pension cum investment scheme launched by Government of India to provide old age security to Citizens of India. It brings an attractive long term saving avenue to effectively plan your retirement through safe and regulated market-based return. Upon maturity, individual gets a lump sum amount along with regular income for a stress-free retirement.
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