Tax Saving Investment Options
Tax Saving Investments are the investment options available to individuals with dual benefits. First benefit is that your funds get invested for future & may result in returns. Secondly, you will get benefit in form of relaxation in Total Taxable Income with the amount so invested thus decreasing your tax liability. Generally, the time for making tax saving investment for any financial year expires on 31st March of that year. However for FY 2019–20 the government has granted relief amid Corona Crisis by extending the deadline to June 30, 2020.
This is one of the many financial benefits granted to Individual Tax payers. This is a huge relief for those who had not made any tax saving investments yet. There are various investments that can be made to save taxes that too while sitting at home.
Tax Saving Mutual Funds
An investment in Mutual Funds or ElSS Funds is a very good tax saving option with a benefit of higher returns on Investment being an equity investment. Income earned on Mutual funds is partially taxable.
Tax Saving Fixed Deposits
Tax saving FD’s are similar to regular fixed deposits but comes with a lock-in period of 5 years. One can claim tax benefit under Section 80 C for investment from Rs 1000 to Rs 1.5 Lakhs. Interest earned on these FD is taxable.
Public Provident Fund Investments
Deposits by Individual Resident in PPF Account are eligible for tax deductions under Section 80 C for an investment of Rs 500 to Rs. 1.50 Lakh . These come with a lock-in period of 15 years with an option to extend it further. PPF also have an option of partial liquidity after 7th year along with some condition. Interest earned on these deposits is tax free. You can invent online also if you have an active internet Banking.
Contribution to National Pension System
You can avail a tax deduction of Rs 1.5 Lakhs for investment made in NPS under Section 80C. Also a further deduction of Rs 50,000 can be availed under section 80CCD (1B). There are two investments options — Active and Auto to choose from. This account can also be opened online through eNPS Portal of NSDL if you have your internet banking enabled. A Permanent Retirement Account is allotted under this scheme. Returns under this scheme vary from 12% to 14%.
ULIP Investments
Unit Linked Insurance Plans are a combination of Insurance and Investment scheme. Deduction is eligible for investment in the name of self as well as spouse or children for an amount of up to Rs 1.5 Lakhs under 80 C. Maturity Proceeds are tax-free. As it is a market linked plan, Interest returns varies for this Investment.
Life and Health Insurance
The annual premium paid for life and insurance by the individual and its wife and children is also available for Tax Savings. For Life insurance, deduction is available not only to Individuals but also to HUF’s. Deduction for Health insurance can also be claimed under separate section, however these insurance are year specific and does not have any maturity or returns. Investment is health insurance benefits in case of any Medical emergencies and should be a part of your Investment Portfolio.
Deductions under Section 80 C are not only available for investments but also for some expenditure listed in the Act. These include repayment of principal amount of Home Loan or Payment of Tuition fees. One can also go for NSC, Sukanya Samriddhi Yojana, EPF, Senior Citizen Savings Scheme to add more items to their portfolio. A diversified investment portfolio is also good for healthy financial planning.
