Five Instruments To Help You Save Income Tax

Many investors use tax planning as a primary strategy for protecting their wealth from dilution. Because everyone in the country wants to take advantage of this perk, its influential investment portfolio has swelled thanks to the proliferation of investments that provide it.

Let’s go through some of the most significant ways to invest your money to minimize your tax bill. These will help you save way more money than you currently are over a period of time.

Equity Linked Savings Plan

Investors who want to minimize their tax liability often turn to equity-linked savings schemes, among the most common market investments. It's an excellent strategy for getting a competitive edge in the market while also reducing your tax bill, thanks to deductions under Section 80C.

At least 80% of the portfolio of tax-saving ELSS funds is invested in equity securities, resulting in the greatest return of any comparable vehicle on the market. Your investment in this plan is subject to a three-year minimum lock-in term. The following arrangements are provided under section 80C to ensure significant tax savings on money associated with the ELSS programme.

As long as the entire amount invested in ELSS doesn't exceed Rs. 1.5 Lakh, the principal amount isn't subject to taxes. Long-term capital gains tax is not required on any gains under Rs. 1 lakh.

Public Provident Funds

The Government of India's Public Provident Fund is a great way to save money on taxes, thanks to Section 80C. Nonetheless, PPF requires a commitment of at least 15 years. This might harm an investor's ability to withdraw their money quickly.

The government sets the interest rate on PPF accounts quarterly and maintains that rate throughout the quarter. Because the full investment amount is eligible for tax exemption under Section 80C, it is one of the most effective tax-saving investments available.

Senior Citizen Savings Scheme

Investing in the Senior Citizens Savings Scheme (SCSS) may provide a tax deduction amounting up to Rs. 1.5 Lakh under Section 80C, making it one of the top tax-saving investments available. However, the scheme's qualifying conditions are stricter than those of other instruments. This investing tool is available only to those who meet the following requirements:

A population of people aged 60 and up Those over the age of 55 who choose early retirement Anybody above the age of 50 working in India's military industry The maximum contribution to SCSS insurance is Rs. 15 Lakh.

Sukanya Samriddhi Yojna

One of the most attractive features of the Sukanya Samriddhi Yojana is the potential tax benefits it offers under Section 80C. The maximum annual tax advantage for an SSY is Rs. 1.5 Lakh. Under the Sukanya Samriddhi Yojna, however, an account holder must have a daughter under 10 years old.

It's important to note that the SSY tax benefits do not apply to investments worth more than Rs. 1.5 lakh per year.

Interest-Bearing Deposits

One of the most popular investment vehicles among risk-averse people is the fixed deposit, which guarantees returns at a fixed interest rate and is eligible for tax deductions under Section 80C after a five-year lock-in maturity term.