The Covid-19 pandemic and the subsequent disaster of job losses, salary cuts have taught us hard that every coin needs to be saved for the worst days. Tax planning is one of the most difficult factors for money matters but the people around are not aware of the range of tax-saving schemes available to them. Given below are some of the tax-saving schemes which might help you save your money legally.
Equity Linked Saving Scheme Or Elss
ELSS is one of the most favorable and profitable tax-saving investment options. This is a kind of mutual fund. The money taken from investors for ELSS is mainly invested in the stock market. It has a lock-in period of 3 years. So that withdrawal of money is not possible before 3 years.
The minimum investment that is required for ELSS is Rs500 but the returns are not guaranteed as it is a market-linked product.
Sukanya Samriddhi Yojana
In this scheme the whole purpose of the government was to promote the girl child wherein the expenses either relating to her higher education or relating to her marriage should be taken care of. This is why Sukanya Samriddhi Yojana was promoted.
In this either the natural parent or the legal guardian is allowed to open an account in the name of his or her girl child. Maximum one account can only be taken under a child and two accounts per family could be opened. The account can be opened till the girl attains an age of 10 years.
The lock in period is for at least 21 years. The interest is exempt from taxes and also no tax on withdrawal on maturity. A partial withdrawal can be allowed after the girl turns 18 years of age for either marriage or for her higher education. The minimum investment of this scheme is Rs 1000.
PPF Or Public Provident Fund
Any resident Indian individual whether salaried or non-salaried can open this account except HUF (Hindu Undivided Family). In this scheme, the interest earned is tax-free even if you withdraw the entire amount.
It has a lock-in period of 15 years but you can extend it with a block of 5 years each. After 7 years you can partially withdraw the money. The minimum investment here is Rs 500.
National Savings Certificate (NSC)
This is also a scheme which is backed by the government and is available at all the post offices. Earlier, before having access to the internet, this was the scheme that was very popular. This is a tax-free scheme and has a lock-in period of 5 years.
The annual interest is payable at maturity and there are no premature withdrawals allowed. The minimum investment here is Rs 1000.
Tax Saving Fixed Deposit
This is a 5-year tax saver FD with a lock-in period of 5 years. The interest earned is taxable. A minimum lock-in period of 5 years. When the 5 year lock-in period expires, the tax saver can access to premature withdrawal. Anyhow, the terms and conditions depend from bank to bank.
For senior citizens, especially, the interest rate on investment is higher. Investment in fixed deposit is suitable for deduction under 80C while calculating the taxable income
The primary holder can benefit from tax deductions while calculating the taxable income in the case of owning a joint account.
Senior Citizen Savings Scheme
This is an income tax saving scheme for senior citizens who are residents in India. The scheme is obtainable for investment through banks and post offices and provides one of the highest rates of the different savings schemes.
The minimum investment amount is Rs. 1000 and in multiples thereof. The scheme also offers the features of investment through cash provided the investment amount is less than Rs. 1 lakh. The deposits which are done into this scheme mature after a period of 5 years. Here the depositors also have the choice to extend the maturity period by another 3 years.
Investment in this scheme qualifies as a deduction under section 80C up to Rs. 1.5 lakhs from the taxable income. The interest on deposits like these is fully taxable and liable for a tax deduction if the interest is above Rs. 50,000. Deposits that are done into a Senior Citizens Savings Scheme account are compounded and paid out annually.
New Pension Scheme Or NPS
This Scheme is controlled by the PFRDA (Pension Funds Regulatory and Development Authority). All the citizens of India over the 18 – 60 years age group can participate in it. Since fund management charges are low, it is highly cost-effective. The money is managed by the fund managers in three separate accounts having different asset profiles viz. Equity (E), Corporate bonds (C), and G Government securities (G). Investors have the option to manage their portfolio actively (active choice) or passively (auto choice).
In the Income Tax Act, contributions made to the NPS are included under Section 80CCD of. The amount limit of deduction in this section along with Sections 80C, 80CCC is not supposed to exceed Rs 1.5 lakhs.
Within this range of options, the National Pension Scheme is very purposeful for individuals having different risk appetites, looking to set aside money towards retirement.
Unit Linked Insurance Plans (Ulips)
This is considered as one of the tax-saving schemes as it is appropriate for deduction under section 80C. Further, ULIPs include both life cover returns and market-linked returns and have a lock-in period of five years.
A premium part is utilized to deliver life cover, and the other part is invested directly in funds as per your choice.
ULIPs provide a variety of choices to invest and the return on investment is market-linked. From tax under section 10 (10D) of the income tax act, the investment returns are also exempted.
Saving tax is always on every taxpayer’s mind so people look forward to legal avenues to lower their tax liability. Tallybear, being one of the emerging Indian financial and tax consultation companies providing technology-enabled financial services is here to help.
