3 best tax saving instruments and it's Benefits

Economics 15 May 2021 1:40:PM

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While paying taxes is one of the duties of a responsible citizen, the government has provided various means, provisions, and the best ways to save tax in India. Therefore, tax-saving instruments are primary tools that help investors from overpaying and underpaying the income tax share. You can make investments using the same and reduce taxable incomes.

Benefits of Tax Saving Investment in India:

Whether you are a young professional or someone with long years of work experience, tax-saving practice is a healthy habit to possess. There are several benefits to it as well. Some of them include:

  • Using tax-saving instruments yields major returns in the future. This augurs well and helps you in meeting financial requirements. 
  • As mentioned before, it is a healthy practice to set aside a part of your income and make investments.
  • Tax-saving instruments act as schemes which build a corpus. It helps you achieve short-term and long-term financial goals. 
  • You can use tax-saving deductions in case you have interest accrued on loans or room rent.

Here are some of the best investment options to save tax in India

Equity Linked Savings Scheme – ELSS

ELSS is one of the most popular tax-saving instruments opted by investors. Under Section 80C of the Income Tax Act, 1961, you can save tax as well as gain large return too. In ELSS, 80% of the total portfolio is invested in equity securities. Therefore, it is the only pure equity investment that offers deductions up to Rs 1.5 lakh in a financial year. Also, capital gains less than Rs 1 lakh is not charged as per long term capital gains tax. The lock-in period with ELSS funds is 3 years with returns of 15% - 18%.

Public Provident Fund – PPF

Public Provident Fund is one of the most common tax-saving and long term investment schemes in India. As far as tax benefits are concerned, interest and the principal amount of PPF is fully exempt from income tax. Moreover, interest earned is exempted from tax calculations. The PPF interest rate is generally announced by the government of India every quarter which remains fixed for a given period. The lock-in period with PPF funds is a long 15 years with returns of 7% - 8%.

Term Insurance

As per Section 80C, under the income tax calculations, the premium paid for life insurance is deductible. To avail this benefit, premium payments should not be more than Rs 1.5 lakh. It is a great method to save taxes and secure you and your family. 

These are some of the best tax-saving instruments which open up dual possibilities of saving tax as well as investment. Plan and prepare to save taxes at the beginning of the financial year and avoid panic in the end.

GEPL Capital is one of the leading full-service broking firm and best mutual fund company in India, offering best-performing schemes online. For more details on how to save tax in India, contact our experts. Visit Here.

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