5 popular tax saving options
By understanding the various tax-saving options available under the Income Tax Act, 1961, employees can maximize their deductions, secure their financial future, and ensure compliance with tax regulations. One of the most popular ways to save tax is under Section 80C of the Income Tax Act for old tax regime taxpayers. This section allows you to claim deductions of up to Rs.1.5 lakh per financial year on various investments. Here are 5 popular tax saving options.
Public Provident Fund
The Public Provident Fund Scheme is a popular investment option to save tax. PPF is a long-term savings and investment product. To begin, you must open a PPF account at the post office or specific public and private sector bank locations. A guaranteed interest rate is earned on contributions made to the PPF account. In a fiscal year, you are eligible for deductions up to Rs.1.5 lakh from these deposits under Section 80C. Contributions made to EPF are eligible for tax deductions.
Equity Linked Savings Scheme (ELSS)
These are mutual funds that invest primarily in equities and have a lock-in period of three years. Investments in tax-saving mutual funds, also known as equity-linked savings scheme (ELSS), qualify for tax benefits. Investments towards tax-saving mutual funds are covered under Section 80C of the Income Tax Act up to a maximum of Rs.1.5 lakhs.
Life Insurance Premiums
Premiums paid towards life insurance are covered under Section 80C of the Income Tax Act up to a maximum of Rs.1.5 lakhs.
Five-Year Fixed Deposits
Fixed deposits with a lock-in period of 5 years with banks or post offices. In a given fiscal year, this gives investors the opportunity to seek a deduction of up to Rs. 1,50,000 from their taxable income. This deduction helps reduce the taxable income, thereby lowering the overall tax liability.
Other post office schemes
Senior Citizens Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC) and Post Office Time Deposit (POTD) offer tax benefit under section 80C of Income Tax Act apart from PPF, allowing investors to claim deductions of up to Rs 1.5 lakh per financial year. The interest rates on these schemes are revised by the government every quarter.
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