It is the innate desire of every investor to get maximum returns while reducing their tax liability. If you are looking for tax-saving investments, here are a few best investment opportunities you can consider investing in.
No matter if you are a business person or a salaried professional, every year, you would get alerts from the employers and government officials for tax payments. There can be nothing more frustrating than giving away a part of your liquid cash as taxes that you can otherwise enjoy. But, there are plenty of ways to reduce your tax liability.
As a smart investor, you must invest in various tax-free investment instruments throughout the year. This will not help reduce the tax burden but also help you generate valuable returns. If you are looking for tax-free investment opportunities, here are a few options you can consider:
Public Provident Fund
The PPF or Public Provident Fund has been one of the most popular and preferred investment options among risk-averse investors. PPF is backed by the government, and it provides guaranteed returns, and the interest that you earn at the end of the investment tenure, along with the principal amount is completely tax-free.
The PPF is a long-term investment option, and it has a tenure of 15 years, which can be further extended by five years. The minimum amount you must invest in the PPF is Rs. 500 to keep the investment active and the maximum amount you can deposit in a year is Rs. 1.5 lakhs. You can open a PPF account with any of the nationalised banks or at the post office.
National Pension Scheme
The National Pension Scheme or NPS is a social security initiative by the government of India that aims to provide financial security to all citizens after they retire from active service by offering them a pension. It is a voluntary investment scheme that provides tax benefits under Section 80 C and 80CCD of the Indian Income Tax Act, 1961. The amount you invest in the NPS is tax-free to a limit of Rs. 1.5 lakhs in a financial year.
NPS is an excellent tax-saving investment option for people who wish to take voluntary retirement and have low risk-appetites. The NPS invests in various market-linked products, and it is known to provide higher returns than traditional investment options like a bank savings account and bank fixed deposits. Historically, NPS is known to deliver returns in the range of 8% to 10%.
Senior Citizen Saving Scheme
As the name suggests, this tax-saving investment scheme is meant for senior citizens (people who are aged over 60 years). This investment scheme offers dual benefits of tax-saving and guaranteed returns. If you are over 60 or have opted for a voluntary retirement scheme (VRS), you will be eligible for SCSS. You can invest a maximum of Rs. 15 lakhs (either individually or jointly) in a financial year for a maximum of five years, which can be further extended by three years.
Life Insurance Policy
In today’s time, a life insurance policy is not just an option but a necessity. Apart from getting financial protection against the uncertainties of life, investing in life insurance is a great way to reduce your annual tax liability. The premium you pay towards the policy is considered a deduction under Section 80C of the IT Act. Additionally, in the event of your untimely demise, the death benefit that the beneficiary may receive is exempted from tax under Section 10(10D).
Today, different insurance plans cater to the people’s different insurance needs. You can choose from the traditional plans the term plan, or you can opt for ULIPs, which provide the dual benefit of investment and insurance.