How crucial do you think it is to start saving up on taxes? Quite important, right? Well, obviously, it would be – since a lot of our hard-earned money goes away. The worst part about this is that not a lot of people know how to save up on taxes as a whole. Instead, they just try to endure what they have been given.
This is not actually the case – you need to know that there are just a lot of ways that you can save up on taxes. Here are some schemes that can give you that benefit.
Schemes that Help You Save Up on Taxes
When you consider how to save tax in India – keep in mind that your goal needs to be more than just about tax savings. The ultimate goal needs to be to invest in the best-matched investment option while also saving money on taxes.
Although, here are some schemes that help you save a considerable amount of taxes:
1) ELSS Mutual Funds
Equities Linked Savings Schemes are mutual funds that invest a significant portion of their assets in equity. Furthermore, the fund has a three-year required lock-in period, which is the shortest of any investment product.
Investment in ELSS funds is tax-deductible up to Rs. 1.5 lakh. The deduction is available for both lump sum investments and investments made through a systematic investment plan (SIP). Because ELSS funds engage heavily in equity, there is always some risk.
ELSS funds provide both financial appreciation and tax savings. As a result, it is one of the most popular tax-saving methods among investors.
In general, taxpayers who want to claim Section 80C tax deductions to Rs 1.5 lakh and are willing to assume some risk can consider investing in ELSS. These mutual funds are equity- oriented, with a minimum of 60% of their portfolio invested in equities and equity-related assets. As a result, it is critical to remain invested in the funds for an extended length of time in order to reap the benefits of the returns.
One of the most prominent tax-saving programs is the Sukanya Samriddhi Yojana. The government of our country launched it in 2015 as part of the – ‘Beti Bachao Beti Padhao’ scheme. It had an essential impact on the general people. The scheme allows for a fixed-income investment in which the taxpayer could make regular deposits while earning interest. Sukanya Samriddhi Yojana investments are also deductible under Section 80C of the Income Tax Act.
The SSY interest rate is determined quarterly by the government and it is payable at its maturity. The scheme has a 21-year lock-in period and will mature after that time period expires. A yearly deposit of Rs. 250 is required for a period of 15 years.
Failure to pay the amount in a year will result in the account being disconnected. To reactivate the account, you must pay Rs. 50 penalty in addition to the original Rs. 250 deposit.
The following are the eligibility requirements for opening a Sukanya Samriddhi account:
● This scheme is only available to female children.
● The girl child cannot be older than ten years old. A one-year grace period is granted,
allowing the parent to invest within one year of the girl’s kid being ten years old.
● The investor must provide documentation of the daughter’s age.
3) Unit Linked Insurance Plan
One of the most prominent investment plans in India is the ULIP Life Insurance Plan. It assures that one’s family is financially secure in the event of death. The taxpayer can profit from the income tax act by acquiring a life insurance policy.
The premium paid toward the acquisition of a life insurance policy is deductible up to Rs. 1.5 lakh. Furthermore, income from the policy’s maturity is tax-free under Section 10(10D). If the premium is less than 10% of the total assured, the income is tax-free. In the event that the money is transferred to the nominee of the person insured, it is tax-exempt in the nominee’s hands.
4) Senior Citizen Saving Scheme
An Elderly Citizen Savings Scheme is a kind of income tax saving plan provided to senior citizens who live in the country. The scheme – which is open for investment with banks and post offices, has one of the greatest interest rates among the many savings schemes.
Depositors can invest as little as Rs. 1000 in multiples of that value. The scheme also allows for cash investments if the total amount invested is less than Rs. 1 lakh. Deposits deposited into the scheme mature after a 5-year period. Depositors could also choose to prolong the maturity time by another three years.
Investment in the Senior Citizen Savings Scheme is deductible from taxable income up to Rs. 1.5 lakhs under section 80C. The interest on such deposits would be fully taxable and deductible if the interest exceeds Rs. 50,000. Deposits to a Senior Citizens Savings Scheme account are compounded and paid out once a year.
The National Pension Scheme, or NPS, has grown in popularity as a tax-advantaged investment vehicle. It is a tax-saving alternative open to both government and private sector employees. It allows the depositor to save for retirement while also receiving a regular monthly income. The depositor’s money is invested in a variety of schemes, including the stock market.
Tier-1 and Tier-2 NPS accounts are available. A tier-1 account is locked in until the subscriber reaches the age of 60. The subscriber’s donations to tier-1 are tax-deductible under sections 80CCD(1) and 80CCD(2) (1B). Tier-2 accounts are voluntary in nature, allowing users to withdraw funds whenever they want. Contributions to tier-2 accounts, on the other hand, are not tax deductible.
Individuals can claim a deduction of up to Rs. 1.5 lakh under Section 80CCD by investing in NPS. A new sub-section 1B was also created, which provided an extra deduction of up to Rs. 50,000/- for NPS payments paid by individual taxpayers.
This is just the tip – the very tiny tip of one of the biggest icebergs. But, it is also somewhere
that you can get started. So, make sure you choose the scheme with the highest benefit of