Maximizing savings with tax-saving investments in India
Navigating the tax-saving investment landscape in India can significantly impact your financial health. With a variety of options available, understanding how to maximize your savings while reducing your tax liability is crucial. This article explores practical strategies and investment avenues. They can help you achieve your goal, ensuring you make informed decisions to enhance your financial well-being.
Invest in Equity Linked Savings Scheme (ELSS)
Equity Linked Savings Schemes, or ELSS, are mutual funds that offer high returns and tax benefits under Section 80C. Investing up to ₹150,000 in ELSS can reduce your taxable income, thus lowering your tax liability. These funds have a three-year lock-in period, which is shorter than that of the Public Provident Fund or National Savings Certificate.
Opt for Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a popular long-term investment option. It offers tax-free interest and returns. Contributions up to ₹150,000 per year qualify for a deduction under Section 80C. The PPF has a lock-in period of 15 years. It provides the dual benefits of compounding interest and tax savings. This makes it an ideal choice for individuals seeking safe and steady growth.
Save through National Pension System (NPS)
The National Pension System serves as both a retirement savings plan and a tax-saving investment. Contributions up to ₹150,000 are deductible under Section 80CCE. An additional deduction of up to ₹50,000 is allowed under Section 80CCD(1B). This effectively permits deductions up to ₹200,000. NPS investments are market-linked, offering various fund options based on one's risk appetite.
Utilize health insurance premiums
Health insurance premiums not only protect against medical emergencies but also offer tax benefits. Premiums paid for oneself, spouse, children, and parents qualify for deductions under Section 80D of the Income Tax Act. Up to ₹25,000 can be claimed for insurance premiums for the family. An additional ₹25,000 is deductible for premiums on behalf of parents under sixty years old.
Consider Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme. It promotes savings for a girl child's future educational and marriage expenses. Contributions to SSY qualify for a deduction under Section 80C. They can reach ₹150,000 annually. This scheme offers an attractive interest rate. Its tenure lasts until the girl reaches the age of 21 or upon her marriage after turning 18.
