Income tax saving guide for all

Taxes are an integral part of our life. Tax is used by the government to provide certain basic provisions to citizens. Individuals who earn i.e. have income more than a certain amount are expected to pay taxes, as per the existing Income tax slabs. The government also provides certain provisions wherein one can save tax. Tax deductions can help one reduce the taxable income, lowering their overall tax liability and thereby helping them save on taxes.

Every year most of us struggle to save taxes. While most of us have an idea about commonly known options but tax saving can be challenging for a young newly recruited employee.

Investment options under section 80C are as follows

  1. Investment in PPF
  2. Employee’s share of PF contribution
  3. National Saving Schemes
  4. Life Insurance Premium payment
  5. Children’s Tuition Fee
  6. Principal Repayment of home loan
  7. Investment in Sukanya Samridhi Account
  8. Unit Linked Insurance Plan
  9. Equity Linked Saving Schemes – Tax Saving Mutual Funds
  10. Sum paid to purchase deferred annuity
  11. Five year Fixed Deposit scheme
  12. Senior Citizens savings scheme
  13. Contribution to notified Pension Fund set up by Mutual Fund or UTI.
  14. Contribution to notified annuity Plan of LIC
  15. Subscription to notified bonds of NABARD

Popular tax saving options available under section 80C

Available Option Minimum Investment (Rs.) Lock In Returns Taxability
ELSS – Tax Saving Mutual Funds 500 3 years Market Linked LTCG Tax @10%
PPF 500 15 years 8.00% Interest rate free
NSC 100 5 years 7.60% Interest Taxable
Bank Saver Tax Deposit 1000 5 years 6.85% Interest Taxable
ULIP 5 years Market Linked

Out of all the tax saving options, we strongly recommend Equity Linked Saving Schemes- ELSS because the advantage it has over other tax-saving investment options been their short lock-in period of just three years as compared to alternatives which has longer lockin period example PPF has 15 years lockin period. Moreover, ELSS funds are majorly equity-oriented and deliver  better returns in the long-run.

One should invest in ELSS funds only if they have longer investment horizon as it  can be volatile in short term. It is a good, tax-saving choice for investors who want to earn higher returns through equity exposure. In long term of more than 7 years one can expect conservative returns in the range of 12%-15%.



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