5 Popular Tax-Saving Schemes in India

Investments help in fighting inflation, build saving habits and grow our money in the long and short term. But how to manage investments is a concern for almost everyone. Not only that, tax saving is also another subject on which we all like to focus on. Thankfully, with the finest tax-saving plans in India, you can both save and earn money. The commencement of the fiscal year is the best time to plan for tax-saving investments as they will ensure year-long profits along with tax saving.

While we all want to save money on taxes, only a few are successful. The reason for this could be a lack of information or difficulties in incorporating the best-suited option into your investing strategy. Hence, in this article, we have compiled a list of the greatest tax-saving investing options in India to assist you in comparing and making an informed decision.

Unit Linked Insurance Plans or ULIPs

One of the most prominent investment strategies in India is the ULIP. It ensures that in the event of the death of the policyholder, one’s family is financially secure. 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 eligible for a deduction of up to ₹1.5 lakh under section 80C of the IT Act, 1961. Furthermore, income earned on the policy’s maturity is tax-free under section 10 (10D). Additionally, if the premium is less than 10% of the total assured, the income is tax-free. In the instance where the money is given to the nominee, the money is treated as tax-exempted in the nominee’s hands.

Public Provident Fund or PPF

PPF has long been a popular tax-saving option for taxpayers. The fact that PPF comes within the exempt tax status is one of the main reasons for its popularity. PPF accounts can be opened at a bank or a post office. The amount invested by taxpayers throughout the financial year can be deducted as per section 80C of the IT Act. The maximum investment amount in PPF is ₹1.5 Lakh that can be claimed for deduction. The return and maturity amounts are tax-free because PPF is under the exempt category. PPF accounts have a 15-year lock-in term and provide investors with the following alternatives, that is increasing the tenure by another five years or withdrawal of account proceeds.

Sukanya Samriddhi Yojana or SSY

One of the most prominent tax-saving programmes is the Sukanya Samriddhi Yojana. The government of India launched it in 2015 as a component of the Beti Bachao Beti Padhao campaign. It had a significant impact on the public. The scheme allows for a fixed-income investment in which the customer can make regular deposits while also earning interest. Sukanya Samriddhi Yojana investments are also eligible for deductions as per section 80C of the Income Tax Act

National Pension Scheme or NPS

The National Pension Scheme has grown in popularity as a tax-saving scheme over the past few years. It’s a tax-saving alternative that both government and private employees can make use of. It allows the depositor to create a retirement fund while also receiving 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 the two categories of NPS. The tier-1 account comes with a lock-in period that lasts until the subscriber turns 60 years old. The subscriber’s contributions to tier-1 are offered tax benefits under sections 80CCD (1) and 80CCD (2) (1B). Tier-2 accounts are purely voluntary, allowing the user to withdraw funds if and when they so choose.

Equity Linked Savings Scheme or ELSS

ELSS are mutual funds that invest a significant portion of your holdings in stocks. In addition, the fund has a three-year statutory lock-in period, which is the lowest among all investment products. Investments in ELSS funds are eligible for a deduction of up to ₹1.5 lakh as per section 80C of the IT Act, 1961. The deduction is available for both lump-sum investments and those made under a SIP. However, this investment comes with certain risks.

Now that you know about some of the most popular tax-saving schemes in India, go ahead and invest today! Your decisions today can make your tomorrow much better!