A detailed guide on the best tax-saving investments
As citizens of India, we all bear the burden of ensuring the country becomes self-sufficient and achieves that coveted status of a developed country. To accomplish this dream, we must do our part and pay taxes on time. In appreciation of the taxes we pay, the government offers various types of tax cuts. You can leverage these tax cuts by investing in tax-saving investments. Here are some of the best ones.
Short for Public Provident Fund, PPF is one of the most preferred income tax-saving options for Indian investors looking to build a corpus. PPF falls under Section 80C tax-saving instruments, wherein you can invest up to INR 150,000 per annum and avail of tax benefits. PPF is characterised by its lengthy 15-year lock-in period and is best known as an Exempt Exempt Exempt (EEE) investment, which means the amount invested, the interest earned, and the maturity amount is entirely tax-free.
Yet another tax-saving investment that qualifies for deductions under Section 80C of the Income Tax Act, 1961, Equity Linked Savings Scheme or ELSS, is a type of equity mutual fund. ELSS has the lowest fixed lock-in period of 3 years but can generate significantly higher returns than most investments. The ceiling for ELSS is once again INR 150,000. Taxpayers in the highest slab of 30% can save up to INR 46,800 in taxes on ELSS investments.
Yet another critical investment that also provides tax-saving investment options, health insurance is a must-have. You get deductions under section 80D for health insurance premiums paid for self, spouse, dependent children and parents. Based on your and your parents’ age, you can enjoy deductions of INR 25,000 to INR 100,000 per annum on health insurance premiums.
The list of the best tax-saving investments includes tax-saving Fixed Deposits. This investment option also falls under Section 80C and comes with a minimum lock-in period of 5 years. You can claim tax deductions of maximum investments of INR 150,000 and stand to earn higher interest rates than those offered by banks.
Other 80C instruments: The National Savings Certificate, Sukanya Samriddhi Yojana, Employer Provider Fund, Unit Link Insurance Plan, etc., fall under Section 80 C and allow you to claim deductions of INR 150,000 p.a.
Interest on home loan: Claim up to INR 200,000 per annum on the interest component of your Home Loan under Section 24 B.
Interest on Savings Bank Account: Claim deductions of up to INR 10,000 on interest earned on Savings Bank deposits under Section 80TTA
Donations: Get tax deductions on contributions made to charitable institutions and other entities under Section 80G.
Capital Gains Exemption: Enjoy exemptions on capital gains under Section 54 and 54F
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With so many tax-saving investment options, you can save lakhs of rupees in taxes each year. While creating your investment plans, remember to pick as many tax-saving investments as possible to reduce your tax outgo.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.