An A-Z guide on Tax-Saving Investments


Investments are integral to manage your finances for the future. If you’ve ever invested in any financial instrument in the past, you might be surely concerned about saving tax on your benefits. Moreover, while you must plan for your taxes, it’s also worth looking at some tax saving plans.

Before you proceed any further, you must know that the ideal time for making tax-saving investments is the beginning of the financial year. Investing at this time allows you to save tax while enjoying year-long returns from your investment.

The reason why not many people can gain the benefits of the investments is the lack of information. That’s why this article aims to list some of the best tax saving investment options available in India:

Life Insurance Policy

Life Insurance is one of the most common and popular investment opportunities in India. It makes sure that your family remains financially stable after your unfortunate death. When you purchase this policy, you can avail tax saving benefits under the Income Tax Act of India.

To be precise, section 80C of the act states that the total premium that you’ve paid to purchase the life insurance is eligible for the tax deduction of up to Rs. 1.5 Lakh. Moreover, the maturity income benefit under this scheme is also tax-free under section 10(10D).

In case the premiums paid are less than 10% of the total assured sum, the income will be completely tax-free as well. If the money is received by your nominee because of your death, the sum assured will be exempt from taxation.

Public Provident Fund

If you know a thing or two about tax saving, you might have heard about Public Provident Funds as they’ve been very popular for generations. The fact that this scheme has a tax-exemption categorization makes it a very desirable option for taxpayers.

To open a PPF account, you can visit your nearest bank or post office. With the help of a PPF account, you can claim a tax deduction for the amount you invested during the financial year under section 80C of the Income Tax Act of India.

These accounts feature a lock-in period of fifteen years and once the plan gets matured, you can either withdraw your proceeds from your account or lock-in again for five more years. It’s one of the most affordable tax-saving investments.

National Savings Certificate

Being an initiative of the Government of India, the National Saving Certificate is a kind of fixed income investment plan that allows low-income families and mid-income families to gain a good amount of returns through the help of their investment.

It’s a complexly secure investment option that involves no risk at all like the provident fund. You can feel free to invest as per your habits of investment and income profile. Moreover, it also qualifies under section 80C of the Income Tax Act for deduction of up to Rs. 1.5 Lakh.

In addition to the tax-saving benefits of this scheme, you are also assured complete protection of your capital along with a guaranteed amount of interest. Furthermore, the investment can be as low as Rs. 1000 that can be increased as per your convenience.

Senior Citizen Saving Scheme

Available specifically for the senior citizens residing in India, this tax-saving investment can be availed through numerous banks and post offices. It is among the schemes that offer some of the best returns as compared to various savings schemes.

As a depositor, you can get started with as low as Rs. 1000, and it can also be increased as per your requirements. If the investment amount remains lesser than Rs. 1,00,000, then you can facilitate the option to make investments using cash as well.

The plan needs to be matured for five years and you can also extend it by another three years. This scheme is also eligible for tax deduction under section 80C of up to Rs. 1.5 Lakh for the income that you earn through this scheme.

Health Insurance Premium

Health insurance is considered one of the safest and most reliable tax-saving investment options that also takes care of your medical emergencies. This allows you to enjoy dual benefits with the purchase of a single investment instrument.

Additionally, if your parents are less than sixty years in age, you can avail of an additional deduction for their insurance that extends up to Rs. 25,000. In case their age is more than sixty years, then the deductible amount will be Rs. 50,000.

Talking about the case when both you and your parents are above sixty years in age, you can avail a tax benefit of Rs. 1,00,000 under the Income Tax Act. It’s a great way to safeguard yourself from health issues and manage to save the taxes as well.

Sukanya Samridhi Yojana

Established in 2015, the Sukanya Samridhi Yojna is a part of the Beti Bachao Beti Padhao initiative by the Government of India. This investment plan requires you to make regular investments and begin earning interest on it at the same time.

This scheme falls under the guidelines of section 80C under the Income Tax Act and is therefore eligible for tax reduction. The rate of interest offered by the scheme depends on the government who determines it quarterly and the amount is only payable after the maturity of your scheme.

The scheme has a lock-in period of 21 years and requires a minimum deposit of just Rs. 250 which’s required to be paid every year for fifteen years. If you fail to pay the premiums, your account will be automatically halted.

The Takeaway

An intelligent person always seeks opportunities to save money, and taxes are no exception. With the list of tax saving investments eligible for tax benefit and reduction, you can easily save a lot of capital on taxes and enjoy various other benefits as well. Therefore, make sure you conduct your research and invest in one of the aforementioned financial instruments.

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