Nobody wants to pay tax, and everybody looks out for opportunities to save on taxes. That’s where the tax saving investments come into play, as it acts as a better alternative to save money paid as income tax. So, if you are thinking about how to save tax with the help of tax saving investments, then you have landed on the right page. Read further to know more.
In order to save income tax, there are two things you can do:
- By claiming expenses
- By investing in tax saving instruments
The government encourages people to save tax by investing in tax saving instruments. It ultimately benefits the investor in the form of returns on investment and tax benefits. Listed below are some of the prominent tax saving investments that are ideal for saving tax in India:
- Invest in health insurance – one of the best tax saving investments is health insurance, where you get tax exemptions and deductions under the Income Tax Act 1961. In addition, the premium paid towards the health insurance policy is tax-deductible for self, spouse, dependent parents and dependent children.
- Term insurance – if you are looking for an insurance policy with affordable premium rates to save tax, term insurance is the best choice. The tax benefits on term insurance are that the policyholder gets a larger sum assured upon his demise, which is fully tax exempted under Section 10 (10D).
- Investing in agriculture – any income derived from agricultural land is exempted from tax under Section 10(1) of the IT Act 1961. This includes income received in the form of rent from land, the amount generated through agricultural products and the amount received from a farm building.
- Investing in National Pension Scheme – a social security initiative where the entire corpus escapes tax at maturity and the entire pension amount received is tax-free. Those looking for retirement planning can opt for contributing to the National Pension Scheme as it provides old age income with reasonable market-based returns.
- Child insurance plan – for those who are married and have kids can use a child plan as a tax saving investment to save from paying tax. Child plans basically help in the financial securing of your child’s future in terms of their education and marriage.
- Contribute to charity – donating towards charity is tax deductible. Though there is no specific upper limit for donations, different rules restrict the tax deduction amount available on your charity donations.
- Keep some money in your savings account – this is one of the easiest ways to save money from paying tax. You can avail of a tax-free up to Rs 10,000 per year for the interest earned on your savings account. The limit will be Rs. 50000 for senior citizens for the interest received on Fixed Deposit and savings account.
- Invest in ULIPs – ULIPS or the Unit Linked Insurance Plan is another tax-saving investment that offers an option to invest in both debts and equity. Again, this is one among those tax saving investments that provide high returns compared to other options.
- Invest in Sukanya Samriddhi Yojana – the Sukanya Samridhi Yojana offers parents of a girl child below ten years to get a tax deduction. The investment tenure is 21 years or until the girl gets married. The interest earned is 8.5%, which is absolutely tax-free.
- Avail a home loan – Apart from these, you can also avail of tax benefits if you plan your home loan wisely as under Section 80C, the limit is Rs 1.5 lakhs, and for the interest, the amount is Rs 2 lakhs, as per Section 24.
There are plenty of tax saving investments that help benefit the investor in meeting their future financial needs and saving from paying tax. While investing in tax saving investments, make sure to invest in a trusted provider so that you get more coverage and benefits.