Tax Saving Schemes: Saving taxes is one of the major interest for taxpayers across the world, as much of an individual’s earnings are spent on clearing duties and excises. Investing in tax saving schemes and planning on how to save more taxes is the ultimate goal for such people, who look for new ways to save their money. To go about this, many factors such as the amount of money that may be saved, the time period to do it, the reason for saving the said money and other such things must be taken into consideration. For this, there are many schemes that one can opt for.
For example, under the Income Tax Act, 1961, an investor gets the privilege to save tax on his or her investments. Moreover, under the section 80C of this Act, a taxpayer can save a lot of money in a financial year.
Section 80C of Income Tax Act
The Section 80C of the Income Tax Act is one of the most popular options to save taxes for individuals and HUFs in India. This section contains a host of investments and expenses options which you can benefit from. Under this section, you can save up to Rs 1.5 lakh in one financial year.
Here are some investment options through which a taxpayer can save money over a 5-year lock-in period:
Unit-Linked Insurance Plans or ULIPs
A Unit Linked Insurance Plan comprises of a mix of both insurance coverage as well as investments in bonds or stocks and is one of the most go-to options for people who want to save taxes. The beneficiary, under this plan, has to pay a certain premium every month towards the ULIP. A part of this money is used for insurance coverage, while the rest of it goes towards investments in stock, bonds etc. Under section 80C of the Income Tax Act, ULIP premiums are eligible for a tax deduction of up to Rs 1.5 lakh in each financial year. Under another section, the amount you get via your ULIP on maturity is exempt from tax deduction.
Fixed Deposits
Tax-saving fixed deposits are like regular FDs, but they come with a lock-in period of 5 years. You can take a maximum deduction of up to Rs 1.5 lakh for investments in tax-saving FDs. Any resident individual is eligible to invest in tax-saving FDs. However, there is a lock-in period of 5 years. Also, interest earned on such investments is taxable.
Employees Provident Fund
Employees Provident Fund is a tax-savings scheme backed by the government under which all employees would be registered on the Employees Provident FInd Organisation once they start service. The entire PF balance (including interest) is tax-free if withdrawn after a continuous service of five years. Currently, the EPFO provides an interest rate of 8.50 per cent per year.
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Source: News18