Are you looking for ways to reduce your tax burden and make the most of your hard-earned money? The right tax-saving investments can help you lower your taxable income while providing long-term financial benefits. Whether you're planning for your retirement or looking to invest in assets that offer attractive returns, there are several options available for middle-class people that can help you save on taxes. In this article, we will tell you about the best tax-saving investment options, so you can make an informed choice for your financial future:
5 Best Tax Saving Investment Options
1. Public Provident Fund (PPF)
One of the most popular and safest tax-saving investment options is the Public Provident Fund (PPF). With a PPF account, you can invest up to ₹1.5 lakh annually, and the amount you contribute is eligible for deduction under Section 80C of the Income Tax Act, 1961. The interest earned on a PPF account is tax-free, and the maturity amount is also exempt from tax. Additionally, the PPF has a long tenure of 15 years, making it an ideal option for long-term retirement planning.
2. Employee Provident Fund (EPF)
For salaried individuals, the Employee Provident Fund (EPF) is another great option to save on taxes. The Employee Provident Fund is a government-back savings plan in India designed to help employees save for their retirement. It’s considered one of the most effective tax-saving options, offering valuable benefits to both employees and employers alike. EPF is a forced saving scheme, which makes it an attractive way to build your retirement corpus while reducing taxes.
3. Tax-Saving Fixed Deposits (FDs)
Tax-saving fixed deposits are another simple yet effective way to save on taxes (Budget 2024 Highlights). You can open a fixed deposit with any scheduled bank in India for a minimum of 5 years to enjoy tax benefits. While the returns on fixed deposits are lower compared to some other investment options, you can still expect an annual return of around 6% to 8%, as per Future Generali. Therefore, it is a good option if you are looking for a low-risk investment with guaranteed returns.
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4. National Savings Certificate (NSC)
The National Savings Certificate (NSC) is another tax-saving investment option that qualifies for deductions under Section 80C. It is a government-backed scheme with a fixed interest rate, and it comes with a 5-year lock-in period. The interest earned on the NSC is taxable, but it also qualifies for reinvestment under Section 80C, which can help you maximise your tax benefits over time.
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5. Equity-Linked Savings Scheme (ELSS)
If you’re looking for higher returns and are willing to take on some risk, Equity-Linked Savings Schemes (ELSS) are a great tax-saving investment option. This is also called tax-saving mutual funds, which invest in stocks and equity-related securities. They offer the chance for your investment to grow over time while also helping you save on taxes. Investments in tax-saving mutual funds are eligible for tax deductions under Section 80C of the Income Tax Act, up to a limit of Rs 1.5 lakhs, as per HDFC Life. Also, any money received upon death or maturity of the fund is tax-free under Section 10(D).
By choosing the right tax-saving investment options, you can not only reduce your taxes but also secure a brighter financial future.
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