Virtues of Tax Saver Investment

Saving a part of our hard earned income is a big essential in today’s times.

Tax saving investment essentially means instruments that help save tax chunks on our well planned investment. Tax saving instruments are the ones that can help you save money on tax to a large extent. A great chunk of people are now interested to invest in avenues where reducing savings would be helpful. Everything except the taxes required to be paid can be evaded.

The most used tax saving investment options available to the individuals & HUFs under the Section 80C of the Income Tax Act in India can be quoted as under. Section 80C comprises of expenditures and investments used to claim deductions to the limit of 1.5 lakhs in one full financial cycle .i.e. this whole amount can be used to reduce the total income by this amount.

Investment options under 80C:

A significant number of people have started putting their money into tax saving instruments to save the burden of taxes in a shot. Not only have they acted as savings but also a long term pool of money. If the intention is to clearly save on taxes then the following few options will make sense. Below mentioned are some viable options in the current year.

Ways to Save Taxes under Sec 80C & 80D:

  1. Invest money of an equivalent amount of Rs 1.5 lacs under Section 80C to reduce liabilities.
  2. Purchase medical insurance and then raise a deduction note up to Rs. 25,000 (Rs 50,000 for Old Citizens) for medical insurance premium under Section 80D
  3. Claim home loan interest deduction up to Rs 50,000 under Section 80EE

The above mentioned tax saving options can be realized online, without issuing a check in any case. The concept behind online payments is that it is instant and easy. But then there are bottlenecks everywhere, especially technical snags. There’s always a possibility with online give and take. It’s good to contact the company and then go ahead after receiving a reply with confirmation regarding the availability of tax benefit on the transactions within a day.

The below highlighted 4 pointers must be considered when investing in a tax saving investment:

  1. Maximum Savings
  2. Reduced Risks
  3. Low cost Investment
  4. Substantial Margins

Most recommended Tax Saving Investments

Life Insurance and Health Insurance

Insurance (Life & Health) can be categorized together. Buying insurance plans such as term plan or short plan, done online can be beneficial in any regular family setup.

ELSS Mutual Funds

Investment in tax saving mutual funds aka equity-linked savings scheme (ELSS), qualify for tax advantage as well. These mutual funds invest in stock markets, along with other assets for good for individuals falling in the medium to high risk category.

National Pension Scheme

The National Pension Scheme is a potential retirement plan in addition to being to an instrument for tax savings. Individuals can  the funds once they have retired from professional life.

Public Provident Fund

A public provident fund with a specific bank takes time to open. With the help of internet banking, you can open an account online. Take a printout of that filled form and submit along with documents at a designated bank branch for verification.

Use the following pointers to plan your tax-saving:

  1. Verify all the tax saving components in your expenditure so that you can claim them timely like EPF, insurance, home loan repayment etc
  2. Subtract this amount from 1.5 lac to gauge whether this is even eligible for tax exemption after the mark of 1.5 lac. Not the full amount needs to be exhausted.
  3. Make a decision basis your long term goals and risk profile. ELSS funds, PPF, NPS and fixed deposits are a few viable options.

The ideal time to start planning tax saving activities is the beginning of a new financial year for maximum benefits. Most working people wait till the last reminders don’t start disturbing them. This is the smartest way to figure how much can help you save taxes and how much will give you fat returns. Spread your investments over the whole year to avoid unnecessary burden along with tax compatible decisions.

In the upcoming years, saving on taxes will be the most important goal of Indian citizens.

Build wealth along with big savings in tax payments!