income tax
As soon as the month of May begins, a worry clearly appears on the minds of the working class and taxpayers, how to save tax? Every year, at the beginning of the financial year or in the very last moments, people hurriedly start looking for investment options. The result of this haste is that due to lack of correct information, they are not able to use their money properly and miss out on taking full advantage of the tax exemption.
At present the government has given the option of two tax regimes, new and old. Even though the tax rates have been kept low in the new system, most of the deductions or tax exemption benefits have been removed. In such a situation, Section 80C of the Income Tax Act is still the biggest weapon for those taxpayers who are stuck with the old tax regime.
By investing money in the right place through this section, not only can the huge tax burden be reduced, but a strong fund can also be prepared for the future. Let us understand those four major investment options, which not only save tax but also increase your capital.
ELSS: Where market gets bumper profits along with tax exemption
If you are looking for good returns by taking little risk in investment, then Equity Linked Saving Scheme (ELSS) can be a great option. It is basically a mutual fund, whose money is invested in the stock market. The biggest advantage of investing in it is that its lock-in period is only three years. If the market trend is good, then in the long run this scheme proves to be very effective in creating wealth for the investors. It is much liked due to its dual benefits of saving tax and increasing capital.
PPF and NSC fixed return formula
For those who want to keep their hard-earned money completely safe, away from market fluctuations, Public Provident Fund (PPF) is an evergreen option. This is a very reliable scheme of the government, on which interest is currently being given at the rate of about 7.1 percent. Its biggest feature is that the amount invested in it and the interest received on it is completely tax free. PPF is still the first choice of people for long-term financial security.
Similarly, National Savings Certificate (NSC) is also a great avenue for risk-averse investors. This post office scheme has a lock-in period of five years and interest is available at the rate fixed by the government. People who want guaranteed and fixed returns often invest their capital in this scheme.
Will benefit from Sukanya Samriddhi Yojana
For those taxpayers who have daughters at home, Sukanya Samriddhi Yojana is not just a tax saving tool but also an important means of securing their future. In this government scheme, investment can be made annually from just Rs 250 to a maximum of Rs 1.5 lakh. Like PPF, in this also the interest earned and the entire maturity amount remains out of the tax net.
Know these important rules before investing
It is very important to understand a technical aspect while doing tax planning. Whether you invest the entire money in any one of the options mentioned above or invest it by dividing it into different schemes, the Income Tax Department allows a maximum exemption of only Rs 1.5 lakh annually under Section 80C.
