There are certainly several investment alternatives to save tax. The choice of an investment plan that you select depends upon the risk factor, your investment objectives and time horizon. We as investors always look for an option that could help us increase our wealth as well as decrease our tax liability.
Below are some of the investment options that could increase your wealth as well as provide you with certain tax benefits:
Equity Linked Savings Scheme( ELSS)
- Equity-oriented mutual fund scheme along with providing a tax benefit and generate a tax-free income also helps in increasing your overall wealth. This scheme is covered under section 80c of the Income Tax Act. The tax benefit under this scheme is available only for investments up to Rs 1,50,000. This scheme has a lock-in period of 3 years from the date of investment during which no redemption or switch is allowed. To avail the tax benefits one has to check if the scheme is a designated ELSS.
Public Provident Fund(PPF)
- The scheme is a saving-cum-tax saving long term investment option which provides various benefits to the investors but this scheme is meant best only for conservative investors who don’t want to take high risk. PPF falls under EEE (Exempt, Exempt, Exempt) brackets i.e.; all the deposit that is made in the scheme of PPF are deductible under section 80c of the Income Tax Act. The accumulated amount and the interest are also free from tax. PPF account has a lock-in period of 15 years and the minimum and maximum amount of investment per year to avail the tax benefit ranges from Rs500- Rs 1.5lakhs.
Tax Saving Fixed Deposit
- The name suggests this source of investment in Fixed deposit helps the investors in saving tax under section 80c of the Income Tax Act. Under this scheme, one can claim a maximum deduction of RS 150000.
- One must note that the interest earned under this scheme is taxable. This scheme has a lock-in period if 5 years until which the amount can’t be redeemed.
Sovereign Gold Bond (SGB)
- Is an alternative to an investor to own gold. SGBs being government security are considered to be safe. The value of SGBs is calculated in multiples of gram(s) of gold. The maturity period of these bonds is 8 years. The interest earned on SGBs are taxable as per the Income Tax Act but in case of redemption of SGBs the capital gain tax applicable to an individual is exempted.
Unit Linked Insurance Plan
- The special product offered by insurance companies, this plan gives the benefits of investment and insurance under the same plan. Premium paid under this scheme is eligible for deduction up to a maximum of RS 1,50,000 under section 80c of Income Tax Act. Also, the amount received by the investors on the maturity of the scheme is exempt under section 10(10D).
- Tax saving schemes are a great source of financial instruments that help an individual to satisfy their individual needs. Analysing various schemes and your capacity to invest is very important before a person decides to invest. If unable to do so, it is always better to hire a financial advisor and take their opinion about the same.
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