Efficient Financial Planning 9 Tax Saving Investments You Should Know - Ken Research

Efficient Financial Planning 9 Tax Saving Investments You Should Know

When you want to provide a financially safe and stress-free life to your loved one’s, saving is the best option. The money you save today will act as tomorrow’s financial cushion. However, the tax component takes away a significant amount of one’s savings. Hence, you must understand that you can use a bunch of methods to save taxes. However, these ways are classified into two categories. The first way is one’s family expenses, whereas the second one is tax saving investments. These tax-saving options are very efficient in cutting your total sum paid towards taxes.

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Top Tax saving investments

People worry about their tax responsibilities, especially when they have begun earning recently. But, if you plan your tax saving investments beforehand, it can help you maximize your tax savings considerably.

The following list of few top tax saving Investments can be handy:

Life Insurance

Life Insurance acts as safety net to your family. It removes the financial burden off your family’s shoulder and prepares them against unforeseen situations. Under section 80c of income, premiums paid for life insurance are eligible for tax deduction. It helps to reduce the burden of the total amount of taxes paid. The maximum limit for this is Rs. 1.5 Lakh. Section 10D also provides exceptions on the assured sum during the claim time.

Public Provident Fund

PPF is a central government Saving Scheme. It is among the best tax-saving investments for the employed. The contributions they make towards the PPF account gives them eligibility for tax reductions under the 80C section. Moreover, these PPF accounts provide the investors with triple exception advantage of deductions on the deposits, no property tax and tax-free returns and interests.

Tax Saving Fixed Deposit

Tax saving fixed deposit has similar features to a regular fixed deposit. You can put an amount with a guaranteed return of a fixed amount every year. However, these deposits have a particular lock-in period where you are not allowed to draw the money.

It is one of the most beneficial tax saving investments. Under section 80c of the Income Tax law, one can get a nearing 1.5 Lakh rupee tax deduction.

Employee Provident Fund

Every employer must deduct some percentage of their employee’s salary mandatorily and send it to Employee Provident Fund. Here both employee and employer make contributions to the EPF account. These contributions are exempted from the Tax under the 80c section. The maximum amount for deduction of Tax is up to Rs 1.5 lakhs.

National Pension Scheme

The NPS system is a similar pension system like PPF and EPF.  It also enjoys the EEE exception status. Moreover, the total pension withdrawal amount is also tax-free.

Health Insurance

Health insurance plans ensure that you and your family are financially secured. The plan helps to save the health and wealth of your family. Under section 80D, you get an exception towards the premium paid. You can also avail of a reduction of around Rs 25,000 against premiums. The deduction is extended to 50,000 in the case of senior citizens.

saving scheme

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Senior Citizens Savings Scheme

The scheme is mainly for senior citizens in the country who are above 60 years of age. This long-term savings scheme is an excellent opportunity for senior citizens as it can provide income regularly, which also saves Tax. Section 80 C of the Income Tax Act provides a deduction of up to Rs 1.5 lakhs. Moreover, when the nominee or legal heir gets the death benefit, the amount is tax-free.

Unit Linked Insurance Plans

ULIP plan provides insurance cover along with investment in a single plan.  It is a good option among various types of tax-saving investments. The plan provides you with an opportunity of investing in mutual funds, bonds or stocks. Section 80c in the Income Tax act provides an exception towards the premiums paid for ULIPs. You can also avail of a tax deduction on maturity under section 10D, making it one of the best tax saving options.

Equity-Linked Savings Scheme

An equity-linked savings scheme is a type of mutual fund, wherein you can invest a minimum of 80% of the total amount in the equity and its related instruments. The plan comes with a lock-in period for three years during which you are not allowed to withdraw the amount. They provide various tax saving options for you. Section 80c of the income tax act provides tax exemptions for the plan.

Each of us wants to save money to fulfil their dreams. These tax-saving investments can help to save amounts and reduce taxes but they come with different features and horizons.  Make sure you elect plans that fit your needs after understanding their long-term and short-term impact on your personal financial planning.

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