Looking for best tax saving options for salaried or business person? Do you know what are the ways to save income tax in India or in other way what are the best investment options through which one can save taxes in India? In this article I will be guiding you with such 10 tax-saving investment instruments through which one can enjoy income tax exemption benefit as per income tax act in India. These are various popular tax saving schemes where generally mostly people used to invest every year.
One can easily find out such options online by looking for any income tax saving calculators. When you use them them to find out how much tax you have to pay this year, you can find options to get tax exemptions under various sections. In this article, whatever scheme I will be discussing here are mostly from popular section 80C, where the maximum income tax saving limit is up to 1.5 lakh only.
- 1 Best Ways To Invest in India To Save Taxes
- 1.1 ELSS tax saving mutual funds
- 1.2 PPF or Public Provident Account:
- 1.3 NPS or National Pension Scheme:
- 1.4 Sukanya Samriddhi Account:
- 1.5 NSC or National Savings Scheme:
- 1.6 ULIP or Unit Linked Insurance Plan:
- 1.7 Sr. Citizen Saving Scheme:
- 1.8 5 Year Bank Tax Saving FD Scheme:
- 1.9 Insurance Policies:
- 1.10 Rajiv Gandhi Equity Saving Scheme (RGESS):
- 2 Which one is the best Tax saving option among all?
Best Ways To Invest in India To Save Taxes
As I have already mentioned, the most popular tax saving investment options are available under section 80C only. Although there are few other options available, but in most cases it’s under section 80C only. Another important thing you have to note that the maximum exemption is allowed only Rs 1.5 lakh together. If you can remember these small small basic details, then you don’t need any special tax savings tips to invest for saving income tax.
Anyway, let’s explore the options one by one.
ELSS tax saving mutual funds
As the popularity of mutual fund investment are rising in India, there is no doubt that ELSS schemes are the best options to save taxes and also get best return compared to other investment options in this category. One have to choose any one of the best tax saver fund in India and easily start a SIP to invest regularly on monthly basis. It is recommended to invest in mutual funds in SIP way, rather than lump-sum investment.
PPF or Public Provident Account:
PPF or Public provident fund account is the best debt instrument option. In fact this is one of the most popular retirement saving option which is very popular in India. One can easily open PPF account in any bank or post office easily and deposit maximum 1.5 lakh every year. The best part is that PPF is a complete EEE scheme. That means the deposit is tax free, interest is tax free and maturity is also tax free. On top of the that the interest is calculated on compound basis.
NPS or National Pension Scheme:
Creating a pension corpus has become one of the prime focus of everyone as one have to do the same by own as India is heading toward a Govt provided pension free society. In that case NPS is one of the best way to invest money for your retirement. After budget 2017 there are couple of changes in NPS which will definitely attract people to invest more in NPS. Now one can withdraw 25% of the corpus before retirement and the private sector employees can also contribute up to 20%.
Sukanya Samriddhi Account:
Well SSA is specifically for them who have a girl child. This scheme is a very good option for parents to save money for their girl child with highest interest rate compared to all small deposit schemes. You can follow complete details about Sukanya Samriddhi Yojana and understand how to invest and what are the benefits.
NSC or National Savings Scheme:
This a post office savings scheme where you can invest in lump-sum way. You can buy NSC for 5 year term and the return is also guaranteed. If you are looking for risk free & guaranteed return. You can invest in NSC by visiting your nearest post office or recently you can also buy NSC online, if you have a post office saving account online.
ULIP or Unit Linked Insurance Plan:
ULIP plans are quite popular insurance product which are mostly promoted as best tax saving option every year at the end of financial year. These are nothing but an insurance plan where you will get a life cover and also return from equity linked insurance. But the return is good only in long term. You can understand ulip plans better here.
Sr. Citizen Saving Scheme:
These kind of schemes are only for Sr. Citizen people. They can get better return compared to normal tax saving FDs. One can easily follow the article about how to open Sr. citizen FDs in SBI and do the same for other banks also.
5 Year Bank Tax Saving FD Scheme:
They are one of the most popular way people love to save income tax. In fact bank FDs are best for last minute tax saving. But personally I don’t like them much as the return in not good including various complication of TDS rules.
Buying insurance policy is also a good way to save taxes in India. But this concept is totally wrong, as I have seen mostly people buy insurance policies at the end of financial year to save income tax. It is true that one can get tax benefit on the premium paid for insurance policies, but one should understand the importance of insurance first and then only consider it as investment option in case insurance need is already taken care. But even for investment option also, there are better alternative to insurance policies to get high return.
Rajiv Gandhi Equity Saving Scheme (RGESS):
If you are investing first time in RGESS schemes, then you will get a chance to save 50% of the invested money as income tax benefit. The maximum investment possible is up to Rs 50,000 only and your annual income should not be more than 12 lakh per annum. This scheme has been discontinued in Budget 2017, but existing subscribers will get the benefit as promised.
Which one is the best Tax saving option among all?
So, these are few of the very common way of investment which will help you save taxes in India. Out of which if I have to choose few, I will definitely pick PPF account, ELSS schemes and NPS to save tax and also complete my investment. When PPF account will create a huge wealth in long run considering the debt portion of your portfolio, ELSS funds will help you to taste the equity part with higher return in long term. And lastly the NPS will help you build extra tax benefit and also create your retirement corpus.