Income Tax News: Starting an investing journey can resemble trying to solve a complicated puzzle, with each piece determining your financial fate. It is essential to investigate and take advantage of different tax-saving options in order to guarantee a seamless fit, optimise returns, and minimise tax burdens. Investment opportunities that qualify for annual deductions under Section 80C of the Income Tax Act of up to Rs 1.5 lakh. Let’s explore nine important paths that offer crucial tax advantages in addition to yielding returns:
Employee Provident Fund (EPF)
For those on salaries, the EPF is essential. It is inextricably linked to work in India. Employers and employees work together to create this retirement fund, which grows over time with compounded contributions and frequently outperforms many other investments.
Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana serves as a guardian angel for parents who hope their daughters under 10 will have a stable financial future. With its attractive interest rates and government backing, this savings plan guarantees your daughter a tax-free corpus when she grows up.
Public Provident Fund (PPF)
An established player in the investment space, the Public Provident Fund provides stability over its fifteen-year duration, guaranteed by the government. Because the interest is tax-exempt, your retirement savings can grow without interference.
National Savings Certificate (NSC)
Designed with a medium-term investment horizon in mind, the NSC offers a good combination of tax benefits and decent returns. It significantly lowers taxable income under Section 80C and guarantees returns for the duration of its five-year term.
Senior Citizens’ Savings Scheme (SCSS)
After retirement, one should focus on following one’s passions rather than worrying about money. The SCSS offers financial benefits as well as peace of mind to people sixty years of age and older. It is a reliable source of income with consistent quarterly interest payments. Its tax-saving features and five-year tenure make it even more alluring. While investments up to Rs 1.5 lakh are free, interest earned is taxed according to the tax slab of each individual.
Equity Linked Savings Scheme (ELSS)
ELSS offers ideal solutions with professional management and diversification, specifically designed for equity enthusiasts. Its three-year lock-in period sets it apart from other options for tax savings. In addition, because it is connected to the market, it offers chances to build wealth and permits tax deductions. For gains exceeding Rs 1 lakh, capital gains from the investments are subject to 10% taxation.
National Pension System (NPS)
In addition to increasing retirement savings, NPS helps reduce taxes. Section 80 CCE of the Income Tax Act allows for the tax deduction of investments up to Rs 1.5 lakh. The offer is further enhanced by an extra deduction of Rs 50,000 under section 80CCD (1B). Both the accumulated corpus that is withdrawn at maturity and the remaining amount used to buy annuities are tax-free. The ensuing income, which comes in the form of a regular pension, is subject to taxes.
Unit Linked Insurance Plans (ULIPs)
ULIPs present a special offer by combining the growth potential of investments with the protective cover of insurance. A portion of the premium goes towards life insurance, and the remaining amount is carefully allocated to debt or equity funds. Because of the growth and safety features, as well as the tax exemptions on the matured amount, ULIPs are an attractive option. Their maturity proceeds are taxable if the total premium paid for all ULIPs in a given financial year exceeds Rs 2.5 lakh. They have a five-year lock-in period.
Tax Savings Fixed Deposits
Time and time again, the reliable Fixed Deposits (FDs) have proven their worth, serving generations. There is a tax-saving version of FDs in addition to the traditional ones. In addition to earning interest, locking in for a five-year term also allows you to take advantage of Section 80C tax deductions.
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