It’s not uncommon to witness taxpayers get worked-up and tensed in choosing the right investment options as nobody wants to shell those extra bucks from their pockets. Taxpayers often try to find some means to reduce their gross taxable income. Thus, tax-saving investments are an important part of any investor’s life. As a smart investor, you should seek investments that offer not only tax benefits but also tax-free gains. Following are some of the best tax saving investment options under Section 80C of the IT Act, 1961:
Public Provident Fund (PPF)
It is a long-term tax saving instrument offered by the Government of India that helps in creating a financial cushion for individuals post their retirement. The interest rate on these accounts are set every quarter. PPF accounts enjoy an EEE status, i.e. exempt, exempt and exempt. This means that the sum invested in PPF account, the interest earned, and the maturity amount are all exempt from tax.
Unit Linked Investment Plan (ULIP)
ULIPs are another type of tax-saving instruments that not only offers tax benefits but also provides higher gains on investment when invested for a longer investment duration. ULIPs are investment products that provide a combination of investment opportunities and life insurance policy though a mutual fund is a single fund. These funds offer the flexibility to switch between funds about 3-4 times in a year.
National Pension Scheme (NPS)
It is a retirement-focused investment scheme that matures when an investor turns 60 years of age. Among various investment options under NPS, investors are mandated to invest a maximum of up to 75% in equity mutual funds and the rest in debt mutual funds. Investments in NPS are eligible for tax benefits of up to Rs1.5 lac u/s 80C of the Income Tax Act. You can also avail additional tax benefits of up to Rs 50,000 under sub-Section 80CCD (1B) of the IT Act.
Senior Citizen Savings Scheme (SCSS) – It is a savings scheme offered by the government of India which is accessible to Indian residents aged 60 and above. The maturity of these savings scheme is five years, although it can be extended by three years. The interest rate on SCSS is declared at the time of buying the mutual fund scheme. SCSS provide one of the highest interest rates when compared to different savings instruments available in India. SCSS schemes also offer tax benefits of up to Rs1.5 lac.
Equity Linked Savings Scheme (ELSS)
ELSS mutual funds are equity-based mutual funds that invest at least 80% of their total assets in equity and equity-linked securities. ELSS funds offer the dual benefits of capital appreciation and tax-saving benefits when invested for a long duration. Hence, they are aptly termed as ELSS tax saving mutual funds. These ELSS tax saving funds qualify for a tax deduction of up to Rs1.5 lac under section 80C. If you invest in ELSS, you can save up to Rs 46,800 each year.
Irrespective of the tax-saving instrument you choose for your investment portfolio, make sure it aligns with your personal and financial goals, risk profile and investment horizon. Happy investing!