Top 5 Tax Saving Investments in India

While there are tons of investments out there but tax saving investments are add-on to the return from investment. It is because, apart from their regular return, we don’t have to pay tax on it. So, suppose you invest your money at a place and it gives you a return of 8% annually. Now after deducting, say 30%, it comes down to 5.6%. Now, if the same amount invested in tax free investment with the same interest rate will fetch you greater profits.
So, here are the top 5 investments which we recommend you.

  1. NPS (National Pension Scheme)Interest: 4-10%
    Investment Limit: ₹500 – no limit
    Tax benefits: Section 80CCD

    First on our list is NPS. It is for Indian citizens between age of 18 – 60 years . It is similar to investing in professional mutual funds but cheaper. The money is managed by fund Managers in three separate accounts having distinct asset profiles viz. Equity (E), Corporate bonds (C) and Government securities (G).

    Investors have a choice to manage their portfolio as active or manual or automatically. The investor can fetch tax deductions of up to INR 1.6 lakhs under Sections 80C, 80CCC.

    Read More: All You  Need to Know About NPS
  2. Health Insurance or MediclaimInvestment Limit: Rs. 15,000 (20,000 for Senior Citizens)
    Tax benefits: Section 80D

    Second on our list is Mediclaim. Even though it is not a proper investment but it covers expenses incurred from an accident/hospitalization. It gives tax benefits of upto Rs. 15,000 (20,000 for Senior Citizens). Under critical illness the Maturity value is tax free under critical insurance.
  3. Life InsuranceInterest: 0-6%
    Investment Limit: No Limit
    Features: Lock deposit for maximum 5 years
    Tax Benefits: Section 80C (Premium) Section 10(D) (Death / Maturity)

    It is similar to the Mediclaim but it is with dual benefits as premium amount deducted from the income which lowers the taxable fraction and it act as a financial support in case of suddenness. It has tax benefits of upto Rs. 1.5 lakhs under Section 80C of the Income Tax Act. However, the proceeds on death / maturity are tax-free under Section 10(D).
  4. Pension PlansInterest: 4-10%
    Investment limit: ₹500 to no limit
    Feature: low cost Investment
    Tax Benefits: Section 80CCC

    Now this is another beneficial method if a person wants to invest for future as a pension. It also has tax benefits of upto Rs. 1.5 lakhs under Section 80C of the Income Tax Act. During the time of maturity 1/3rd of the collected pension amount is tax free while the rest 2/3rd balance will be treated as income and taxed at the marginal tax rate. But the amount is tax free upon death of beneficiary.
  5. Tax-saving mutual fundsInternet: not fixed
    Investment Limit: no limit
    Features: lock peried minimum 3 years
    Tax Benefit: Section 80C Section 10(D) (Death/Maturity)

    The last on our list are mutual funds. This Investment also known as equity-linked savings scheme (ELSS), one of the best way to get tax benefits. They invest in stock markets as well as in other assets, and it is more beneficial for investors with medium to high risk takers. This Investment is locked for minimum three years. It also covered under tax benefits of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act.. Proceeds on death / maturity are tax-free under Section 10(D).

Thanks for reading. This article was bought to you by Hamari Yojana, an initiative by a Political Science student and a CA student. Stay tuned for more articles like this.If you have any query, drop a comment down below.

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