Income Tax News: Investments known as tax-saving instruments let you take advantage of various tax breaks, exemptions, and rebates to lower your overall tax liability. These financial tools are useful for wealth creation and financial planning, in addition to helping you reduce the amount of taxes you must pay.
The following table includes the top ten tax-saving options:
| Tax Saving Instruments | Tax Benefits under Section* |
| Unit Linked Insurance Plans (ULIP) | Up to Rs. 1.5 lakhs on Premiums u/ Section 80C Tax-free returns u/ Section 10(10D) |
| Capital Guarantee Plans | Up to Rs. 1.5 lakhs on Premiums u/ Section 80C Tax-free returns u/ Section 10(10D) |
| Life Insurance | Up to Rs. 1.5 lakhs on Premiums u/ Section 80C Tax-free returns u/ Section 10(10D) |
| New Pension Scheme (NPS) | Up to Rs. 1.5 lakhs on Premiums u/ Section 80CCD(1)Additional deduction up to Rs. 50,000 u/ Section 80CCD (1B) |
| Equity-linked Tax Saving Scheme (ELSS) | Up to Rs. 1.5 lakhs on Premiums u/ Section 80C |
| Public Provident Fund (PPF) | Up to Rs. 1.5 lakhs on Premiums u/ Section 80C |
| National Saving Certificates (NSC) | Up to Rs. 1.5 lakhs on Premiums u/ Section 80C |
| Senior Citizen Savings Scheme (SCSS) | Up to Rs. 1.5 lakhs on Premiums u/ Section 80C |
| Sukanya Samridhi Yojana (SSY) | Up to Rs. 1.5 lakhs on Premiums u/ Section 80C Tax-free returns u/ Section 10(10D) |
| Tax- Saver Fixed Deposits | Up to Rs. 1.5 lakhs on Premiums u/ Section 80C |
ULIPs (Unit Linked Insurance Plans)
ULIPs are a good tax-saving option if you’re searching for a long-term investment. It provides you with the greatest investment options in addition to life insurance. Your premium yields substantial tax-free returns since it is invested in the debt and equity markets. When you invest in a ULIP over an extended period of time, you can anticipate strong investment growth of approximately 11–20%. Under Sections 80C and 10(10D), ULIPs are tax-saving investments that provide you with tax benefits. These are the best investment plans that offer you high returns from debt and equity instruments along with financial security from life insurance.
Capital Guarantee Plans
A certain level of financial security is provided by Capital Guarantee Plans, which are tax-saving investment options that guarantee the return of your initial capital at maturity. For individuals who place a high priority on capital preservation, these low-risk options are intended to safeguard your principal investment. You can expect annual returns from these tax-saving strategies of between 9 and 15 percent. To achieve this guarantee, the capital guarantee plans combine a combination of equity and fixed-income investments. You can invest in these income tax saving instruments and receive tax benefits under Sections 80C and 10(10D).
Life Insurance Plan
In addition to being tax-exempt, having life insurance will protect your family’s future in the event of your death. Section 80C of the Income Tax Act allows deductions of up to Rs. 1.5 lakhs for these tax-saving devices. Additionally, under Section 10(10D), the lump sum provided to the beneficiary as the death benefit in the event of the insured’s passing is not taxable.
New Pension Scheme (NPS)
NPS is one of the greatest tax-saving options if you’re worried about your retirement and want a plan with benefits related to income tax. NPS is renowned for its flexible features, low cost structure, and investor-friendly features. You can invest a minimum of Rs. 6000 a year here, either as a lump sum or in installments of at least Rs. 500. As the investor, you have the authority to determine how much money to set aside for equity, corporate bonds, and gilt investments.
Equity-linked Tax Saving Scheme (ELSS)
With a three-year lock-in period, ELSS mutual funds are among the best tax-saving options for investors in short-term plans. Additionally, this equity fund allows for flexible investing with as little as Rs. 500 and yields strong long-term returns. Unlike with an insurance or pension plan, you are not required to keep investing after the lock-in period in this instance. Investing a lump sum amount of money all at once is not as wise as spreading it out over time with Systematic Investment Plans (SIP). Using the SIP Calculator, you can also get an idea of the returns on your recurring investments.
Public Provident Fund (PPF)
One of the most popular ways to save taxes and receive income tax benefits under Section 80C is through PPF. The lock-in period for this long-term savings plan is 15 years, and it can be extended in 5-year increments. Up to Rs. 1.5 lakhs can be invested annually in a PPF account. You can invest any amount, either in installments or in one lump sum, up to a maximum of Rs. 1.5 lakhs. You can open a PPF account at a post office or bank branch. For those who are risk averse investors, self-employed professionals, or those not covered by the Employee Provident Fund (EPF), this is one of the best tax saving options.
National Saving Certificates (NSC)
The Post Office offers the NSC fixed deposit programme. A National Savings Certificate (NSC) and a bank fixed deposit (FD) differ only in that the former offers higher returns with options for tax savings, while the latter does not.With this scheme, you can easily take advantage of the tax savings under Section 80 C of the Income Tax Act. On the other hand, NSC is a tax-saving investment option that comes with a 5-year lock-in period. Your returns and tax benefits on earned interest increase with the length of time you invest with NSC. Moreover, this scheme does not allow for early withdrawal.
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