Well, this is very interesting and frequently asked the question. I would also say that most of us don't know about this or don't care unless we see a huge amount of deduction from our salary or money deduction while filing the tax return or declaring income.
I'll try to highlight various tax saving schemes available in India which also promise to give a good return over the period of time. There are many ways but I find tax saving under section 80C, 80CCC and 80CCD most easy to opt, hence below are some tax saving investment opportunity comes under 80C, 80CCC, and 80CCD which anyone can opt in order to save tax and invest wisely.
Public Provident Fund (PPF) account can be opened by resident Indian Individuals and individuals on behalf of minors.
It’s a savings platform that helps employees save a fraction of their salary every month that can be used in the event that you are rendered unable to work, or upon retirement.
The money you invest in EPF, the interest earned and the money you eventually withdraw after the mandatory specified period (5 years) are exempt from income tax.
Premature withdrawal, Loan against Fixed Deposit and Auto-renewal facility.
This is an equity diversified fund and investors enjoy both the benefits of capital appreciation, as well as tax benefits.
An ELSS is a diversified equity mutual fund which has a majority of the corpus invested in equities. Since it is an equity fund, returns from an ELSS fund reflect returns from the equity markets.
This type of mutual fund has a lock-in period of 3 years from the date of investment. This means if you start a Systematic Investment Plan in an ELSS, then each of your investments will be locked in for 3 years from the respective investment date.
Investors can exit ELSS by selling it after 3 years
Returns from an ELSS scheme are tax-free. You can claim up to Rs. 1 Lac of your ELSS investment as a deduction from your gross total income in a financial year under Sec 80C of the Income Tax Act.
You can deduct from your taxable income to a total of Rs. 1 lakh in certain instances, such as your insurance payments.
The pension you receive is taxable as salary whereas family pension received by your legal heirs is taxable as income from other sources.
If you take a lump sum of the accumulated corpus, a certain proportion of the fund value can be taken home as tax-free.
NSC is sold in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000. So, if you want to invest Rs 30,000, you will have to buy three certificates of Rs 10,000 each.
Above are the top easy ways of saving tax in India, however, it's not limited to and apart from 80C, 80CCC and 80 CCD plan you can look for below other smart options to save tax in India.
I'll try to highlight various tax saving schemes available in India which also promise to give a good return over the period of time. There are many ways but I find tax saving under section 80C, 80CCC and 80CCD most easy to opt, hence below are some tax saving investment opportunity comes under 80C, 80CCC, and 80CCD which anyone can opt in order to save tax and invest wisely.
1. PPF (Public Provident Fund)
Public Provident Fund (PPF) scheme is a popular long term investment option backed by the Government of India which offers safety with attractive interest rate and returns that are fully exempted from Tax. Investors can invest minimum Rs. 500 to a maximum of Rs. 1,50,000 in one financial year and can get the facilities such as loan, withdrawal, and extension of account.Public Provident Fund (PPF) account can be opened by resident Indian Individuals and individuals on behalf of minors.
2. Contribution to EPF (Employee Provident Fund)
Employee’s Provident Fund (EPF) is a retirement benefits scheme that’s available to all salaried employees. This fund is maintained and overseen by the Employees Provident Fund Organisation of India (EPFO) and any company with over 20 employees is required by law to register with the EPFO.It’s a savings platform that helps employees save a fraction of their salary every month that can be used in the event that you are rendered unable to work, or upon retirement.
The money you invest in EPF, the interest earned and the money you eventually withdraw after the mandatory specified period (5 years) are exempt from income tax.
3. Years tax saving FD
One can go for tax saving fixed deposit however money will be locked for 5 years and as per the Term deposit scheme, 2006, issued by the Central Government of India, the above Fixed Deposit scheme will not have the following facilities:Premature withdrawal, Loan against Fixed Deposit and Auto-renewal facility.
4. Equity-linked mutual fund/saving scheme
It is one of the most popular Sec 80C investments is in tax saving mutual funds or Equity Linked Savings Scheme (ELSS).This is an equity diversified fund and investors enjoy both the benefits of capital appreciation, as well as tax benefits.
An ELSS is a diversified equity mutual fund which has a majority of the corpus invested in equities. Since it is an equity fund, returns from an ELSS fund reflect returns from the equity markets.
This type of mutual fund has a lock-in period of 3 years from the date of investment. This means if you start a Systematic Investment Plan in an ELSS, then each of your investments will be locked in for 3 years from the respective investment date.
Investors can exit ELSS by selling it after 3 years
Returns from an ELSS scheme are tax-free. You can claim up to Rs. 1 Lac of your ELSS investment as a deduction from your gross total income in a financial year under Sec 80C of the Income Tax Act.
5. Pension plan
A pension plan is a retirement tool. It allows you to claim income tax benefits against your premium payments, by way of both deduction and exemption. Deductions from gross income (Under Section 80C of the Income Tax Act)You can deduct from your taxable income to a total of Rs. 1 lakh in certain instances, such as your insurance payments.
The pension you receive is taxable as salary whereas family pension received by your legal heirs is taxable as income from other sources.
If you take a lump sum of the accumulated corpus, a certain proportion of the fund value can be taken home as tax-free.
6.Life Insurance Policy
You can go for life insurance plans like LIC and other products in order to show the same in a tax deduction. There are many options available and some of them offer a great return on investment. A person should choose the same as per the need and budget, as it's usually a long-term and money, will be blocked till the maturity date.7. NSC (National Saving Scheme)
The NSC is a post-office savings scheme while the PPF was established by the central government in 1968. But both are very safe since they are backed by the government.NSC is sold in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000. So, if you want to invest Rs 30,000, you will have to buy three certificates of Rs 10,000 each.
Above are the top easy ways of saving tax in India, however, it's not limited to and apart from 80C, 80CCC and 80 CCD plan you can look for below other smart options to save tax in India.
- Tax saving under section 80D, 80DD and 80 DDB - Medical insurance, treatment of the handicapped dependent & treatment of specified diseases.
- Tax saving though Home Loan
- Tax saving through education loan 80E
- Tax saving under section 80CCG - GRESS--> Click for more details
- Tax deduction for the donation leave travel allowance
- House rent allowance - HRA
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