As you embark on your financial planning journey, it's crucial to incorporate tax planning, including income tax filing and optimizing income tax returns, into your overall strategy. Effective tax management not only helps you save money but also accelerates your progress towards financial goals. With the ever-evolving tax landscape, staying informed about the latest tax-saving options, including ELSS funds and other investing strategies to save income tax, is essential. Let's explore some of the best ways to save on income tax in the current fiscal year.
i. Tax Saving Fixed Deposits
Tax-saving fixed deposits continue to be a reliable option for investors seeking stable returns while minimizing tax liabilities. Under Section 80C of the Indian Income Tax Act, 1961, individuals can claim deductions of up to INR 1.5 lakhs by investing in tax-saving fixed deposits with a minimum lock-in period of five years. Although terms may vary among banks, these deposits offer consistent returns, making them a preferred choice for many investors.
ii. Employees’ Provident Fund (EPF)
The Employees’ Provident Fund remains a cornerstone of tax-saving strategies for salaried individuals. Mandated by the government, EPF contributions entail a 12% deduction from an employee's salary and dearness allowance, supplemented by employer contributions. The accumulated funds not only serve as a retirement corpus but also offer tax-free principal amounts, interest earnings, and returns upon retirement.
iii. Public Provident Fund (PPF)
The Public Provident Fund, a government-sponsored investment avenue, remains a favored choice for risk-averse investors. With a lock-in period of 15 years, PPFs offer attractive interest rates and tax benefits. Investors can claim tax deductions of up to INR 1.5 lakhs annually under Section 80C, while the accrued interest remains tax-free, making PPFs an ideal long-term tax-saving instrument.
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iv. National Savings Certificate (NSC)
National Savings Certificates serve as another viable option for tax-saving investments, particularly for those seeking short-term commitments. With a five-year lock-in period and no upper limit on investment amounts, NSCs offer flexibility coupled with tax exemptions of up to INR 1.5 lakhs per annum under Section 80C. Similar to PPFs, the interest earned on NSCs remains tax-free, making them an attractive choice for conservative investors.
v. Tax Saving Mutual Funds
Equity-linked savings schemes (ELSS) continue to be a preferred choice for investors seeking tax-efficient returns with exposure to the equity market. ELSS funds offer the dual benefit of tax deductions of up to INR 1.5 lakhs under Section 80C and tax-free returns. With options like Bank Of India ELSS Tax Saver Fund, Quant ELSS Tax Saver Fund and SBI Long Term Equity Fund, Bandhan ELSS Tax Saver fund, DSP ELSS Tax Saver Fund, investors can diversify their portfolios while optimizing tax savings.
vi. Unit-Linked Insurance Plans (ULIP)
Unit-Linked Insurance Plans provide a unique blend of insurance coverage and investment opportunities, making them a popular choice for long-term financial planning. With tax benefits under Section 80C, investors can claim deductions of up to INR 1.5 lakhs annually, thereby reducing their tax liabilities. ULIPs offer flexibility and growth potential, with options like Life Time Classic Plan of ICICI Prudential & Click 2 Invest & Click 2 Wealth Plans of HDFC catering to diverse investor preferences.
Concluding Thoughts
In conclusion, the current taxation landscape offers a plethora of tax-saving options for individuals to explore. By aligning investment choices with specific financial objectives and income tax saving goals, investors can optimize their tax liabilities while securing their financial future. It's essential to stay informed about the latest developments and consult with financial advisors to make informed decisions tailored to your unique circumstances. Start planning today to reap the benefits of income tax filing and investments tomorrow.
Ready to take control of your finances and maximize your tax-saving options? Open a Trading cum Demat Account today and start investing strategically to save income tax while building wealth for your future.
Before investing, don't forget to read the disclaimer—it's a small step that can save you from big surprises!
