Blog Details
Tax saving investment options in India
Fri, 20 Dec 2024
6 mins

In the vast and varied economic landscape of India, understanding the nuances of taxation can seem daunting. However, it's crucial for individuals to acquaint themselves with the tax structure as it plays a significant role in financial planning. India's tax regime encompasses taxes on income, assets, and property transactions.
The collection of these taxes is not merely a governmental prerogative but a foundational element for the nation's growth and development. The revenue aids in facilitating economic advancements and implementing pivotal developmental policies.
With the annual ritual of Income Tax Return (ITR) filing, numerous individuals delve into strategies for tax saving, keen on minimizing their financial liabilities. This proactive approach is not just about safeguarding one's earnings but about making informed decisions that align with lawful practices to optimize tax savings. There are many tax saving investments available. Lets look at various tax saving options in India below:
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What is section 80C?
Among the plethora of sections under the Income Tax Act, Section 80C stands out for its broad applicability and significant benefits. It caters to both individuals and Hindu Undivided Families (HUFs), offering a diverse portfolio of investment and expenditure avenues to claim deductions. A striking feature is the deduction limit set at Rs. 1.5 lakh per financial year, enabling considerable savings.
The primary aim of Section 80C is to spur savings and investment habits among taxpayers by providing tax deductions on the interest earned from various financial instruments. It encompasses deductions not just on principal amounts but also extends benefits to the interest accrued, thus fostering a culture of fruitful investments and financial planning.
Moreover, Section 80C simplifies the process of claiming deductions on interests paid or accrued within India, underlining the government's initiative to encourage domestic lending. It mandates conditions under which deductions on the interest paid can be availed, ensuring a transparent and straightforward procedure. -
Tax-Saving options under Section 80C
Below-mentioned are some of the tax saving options for salaried individuals available under 80C that can assist in knowing how to save tax on salary:
1. Equity Linked Savings Scheme (ELSS)
It is a type of mutual fund with a lock-in period of 3 years. It is the only category of mutual fund in India that qualifies for a tax deduction under Section 80C of the Income Tax Act.
Returns provided by ELSS are comparatively higher than other tax-saving schemes in the long run, as the investments are primarily made in equity markets. Investment can either be made in a lump sum or SIP (Systematic Investment Plan) method. However, you cannot withdraw your money before the completion of the three-year lock-in period.
A significant point to take note of here is the risk factor. Since the investments are made in the stock market, they could carry a relatively high risk. But if you remain consistent, it can prove to be a great option in the long run.
2. Public Provident Fund (PPF)
Public Provident Fund is a long-term government savings scheme that has a tenure of 15 years. A common income tax saving scheme is available at most banks and post offices in India. Its rates change every quarter. Per the circular, the current interest rate on PPF is 7.1%.
The interest on PPF is tax-free. One can open a PPF account with as little as Rs. 500, while the maximum investment allowed in a financial year is Rs. 1.5 lakh, respectively.
3. National Savings Certificate (NSC)
National Savings Certificate is another significant income tax saving scheme that provides a fixed rate of interest at a rate of 7.7% per annum and has a tenure of 5 years.
The interest received on NSC is considered a tax-saving option, and up to Rs 1.5, lakh can be taken as a rebate under section 80C.
4. Tax-Saver FDs
Tax-saving FDs are also one of the best ways to save taxes. One can avail of a tax deduction of up to Rs 1.5 lakh with 5-year tax-saver FDs. However, this income tax saving scheme carries a fixed rate of interest which is currently between 7-8%, and the interest on these FDs is taxable per the investor’s tax bracket.
5. Senior Citizens Savings Scheme (SCSS)
SCSS is a government-backed long-term income tax saving option. It has a tenure of 5 years and can be availed of by those above 60. It provides a rate of 8.2% (taxable). Under this scheme, one can get a tax deduction of up to Rs 1.5 lakh.
6. Sukanya Samriddhi Yojana (SSY)
All such parents with a girl child below 10 can benefit from the SSY scheme. One is eligible for a tax deduction under Section 80C of up to Rs. 1.5 lakhs for the investments made towards this scheme. This account has a tenure of 21 years or until the girl gets married after turning 18.
This scheme's current interest rate is 8.00%, and the interest earned is tax-free.
7. Employee Provident Fund (EPF)
EPF is a retirement benefits scheme, especially for salaried employees. Under the EPF Act, the employer deducts 12% of the basic salary and Dearness Allowance (DA). This amount is then deposited in government-recognized provident fund schemes.
This is one of the typical tax saving schemes wherein the deduction is counted towards the Rs 1.5 lakh limit under Section 80C.
8. Home Loan Repayment
Those who have taken a home loan can claim tax deductions under Section 80C for the part of EMI to repay the principal amount. Although, the amount that one would pay as interest does not qualify for tax deductions.
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What are Tax Saving Options Other than Section 80C?
There are various deductions under Section 80 apart from the 80C deductions that can be used to save on income tax. Enlisted below are such provisions:
- Medical Insurance: Claim a deduction of up to Rs. 25,000 (Rs 50,000 for Senior Citizens) for medical insurance premiums.
- Home Loan Interest: A deduction of up to Rs 50,000 can be claimed on home loan interest under Section 80EE.
- National Pension System (NPS): A tax deduction of up to Rs 1.5 lakh for contributions to NPS can be claimed under Section 80CCD.
- Education Loan: Under Section 80E, you can claim a deduction on interest paid on education loans.
- Charity: If you have made specific charity to notified institutions or funds, they can be deducted under section 80G.
- Capital Gains: Under Section 54-54F, you can claim the Capital gain exemption for capital gains.
- Electric Vehicle Loan: Under Section 80EEB, the interest deduction for a vehicle loan for purchasing an electric vehicle can be claimed.
- Savings Account Interest: Under Section 80TTA, you can claim a deduction of up to Rs 10,000 for interest received in a savings bank account.
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To bring it to a close
Saving taxes is not just about reducing your tax liability; it’s a crucial step towards building a secure financial future. With a wide range of tax-saving options in India, such as ELSS funds, PPF, NPS, tax-saving FDs, and insurance policies, you can strategically plan your investments to not only save taxes but also achieve your financial goals.
At InCred Premier, we understand that navigating through tax-saving options can be overwhelming. Our team can guide you in selecting the most suitable tax-saving strategies tailored to your financial needs. Whether it’s optimizing your investments or ensuring compliance with tax regulations, we are here to help you make informed decisions.
Start your investment with InCred Premier – because every smart investment leads to a brighter future. If you need any further assistance you may reach out to us at 8047593769 or open your account, and we can help you start your investment journey.
Start your investment journey with InCred Premier today