What are some of the best income tax saving schemes in India?

Prologue

In the realm of financial planning, saving on income tax is a crucial aspect that inpiduals need to consider. The Indian government, acknowledging this, has provisioned various income tax saving schemes. These schemes are designed not only to foster a culture of savings but also to bolster financial security among the populace. By making astute investments in these tax saving schemes, inpiduals can significantly pare down their taxable income, thereby diminishing their tax liability. This strategic reduction in tax liability can potentially unlock more disposable income, paving the way for enhanced financial stability and wealth accumulation over time. With a plethora of tax saving schemes at one’s disposal, the pathway to achieving a well-balanced financial portfolio becomes increasingly attainable. In this vein, we aim to unravel some of the most lucrative income tax saving schemes available in Incredible India.

Equity-Linked Savings Scheme (ELSS):

One of the most prominent income tax saving schemes in India is the Equity-Linked Savings Scheme (ELSS). ELSS is a persified equity mutual fund that not only helps in reducing your tax liability but also provides an opportunity for capital appreciation. Investments in ELSS are eligible for tax deductions under Section 80C of the Income Tax Act, thereby making it an attractive option for inpiduals aiming to blend tax savings with wealth accumulation. While there is no limit to the amount that can be invested, as per the act a maximum of Rs. 1.5 lakh is eligible for a tax deduction. By investing this amount in an ELSS, one can save up to ₹46,800 a year in outgoing tax

Public Provident Fund (PPF): A Safe Harbor with Assured Returns

The Public Provident Fund (PPF) serves as a long-term investment avenue, catering to a wide range of investors, especially those with a low-risk appetite. The scheme is fortified with tax benefits under Section 80C of the Income Tax Act, which acts as a catalyst in attracting investors looking for avenues to reduce their tax liability. Moreover, the PPF scheme is known for providing a fixed rate of return on the amount invested, which, although is less compared to the returns on equity investments, offers a guaranteed return, making it a reliable investment option. The backing of the Indian government enhances the credibility and safety quotient of the PPF scheme, making it a virtually risk-free best investment plans. This government backing is crucial as it provides a sense of security to risk-averse inpiduals, ensuring that their hard-earned money is safe and will grow over time, albeit at a slower pace compared to more aggressive investment options.

National Savings Certificate (NSC): Flexibility Coupled with Capital Safety

The National Savings Certificate (NSC) is a savings bond program designed to motivate subscribers, chiefly those within the small to mid-income bracket, to invest. For inpiduals seeking a low-risk investment avenue, the National Savings Certificate (NSC) is a viable choice among the tax saving schemes. Similar to PPF, investments in NSC are also eligible for deduction under Section 80C. The scheme comes with a fixed interest rate and a choice of tenure, providing flexibility while ensuring your capital’s safety.

Unit Linked Insurance Plans (ULIPs): Bridging Insurance with Investment

Unit Linked Insurance Plans (ULIPs) blend insurance with investment, thereby serving dual purposes. A portion of the premium goes into life insurance, while the remainder is invested in equity or debt funds. ULIPs also come under Section 80C’s purview, making them a part of the attractive income tax saving schemes in India. A policyholder can avail a tax deduction up to Rs.1,50,000 per financial year on the policy premium amounts paid towards the ULIPs. This not only provides tax relief but also offers a chance for capital growth over the long term.

Senior Citizens Saving Scheme (SCSS): A Lucrative Nest Egg for Seniors

Senior Citizens Saving Scheme (SCSS) is tailored for the senior citizens of India, offering a secure, tax-saving investment option. It is considered as a retirement benefit account that is backed by the Indian government and can be availed by any inpidual above the age of 60. SCSS provides a regular income, capital protection, and tax savings under Section 80C. The interest rate of SCSS is usually higher than that of regular savings accounts, making it a lucrative option for seniors.

Read more: What are the Best Short-Term Investment Plans in India?

National Pension System (NPS): Forging a Secure Retirement Path

National Pension Scheme (NPS) India is a voluntary long-term investment scheme tailored for people planning their retirement. It is governed under the purview of the Pension Fund Regulatory and Development Authority (PFRDA) and the Central Government. The scheme advocates for inpiduals to contribute to a pension account consistently throughout their employment tenure. Post-retirement, subscribers have the liberty to withdraw a specified percentage of the accumulated corpus, providing a financial cushion to sustain their retirement life. The National Pension System (NPS) is a long-term retirement savings scheme designed to enable systematic savings. It is a mix of equity, fixed deposits, corporate bonds, liquid funds, and government funds, among others.

Health Insurance: A Shield Against Medical Expenses and Tax Liability

Furthermore, Health Insurance premiums also provide tax benefits under section 80D of the Income Tax Act. Section 80D permits a tax deduction of up to Rs 25,000 per financial year on premiums paid towards medical insurance. Additionally, it encompasses a Rs 5,000 deduction for any expenditure incurred on preventative health check-ups. Investing in a good health insurance policy not only provides a financial cushion against medical expenses but also aids in reducing taxable income.

Epilogue

Each of these tax saving schemes comes with its own set of advantages, tailored to meet varying financial goals and risk appetites. It’s imperative to assess your financial objectives, risk tolerance, and investment horizon before ping into any of these schemes. A well-thought-out investment in these income tax saving schemes can pave the path for financial serenity, enabling a balance between tax saving, capital protection, and wealth creation. So, as you march towards financial stability, let these schemes guide your way, ensuring a reduced tax liability and a secure financial future.