A tax cut is always a good thing! Investment in tax-saving instruments is a primary goal for tax-savvy individuals. Savings, on the other hand, is a personal decision. The amount of money saved, the time horizon, the motive for saving, and other factors influence the type of savings instrument a person chooses. It is possible for investors to avoid paying income tax under the Income Tax Act of 1961. Taxpayers can also save a large amount of money each year by taking advantage of Section 80C of the legislation. Investing during a five-year lock-in period allows investors to take advantage of four tax-saving investment options.
Section 80C
Tax-saving options for individuals and HUFs in India are most widely available under Section 80C of the Income Tax Act, which includes several investments and costs from which you can benefit over time, up to a maximum of Rs. 1.5 lakh in a financial year. Included in the activities in Section 80CCC and Section CCCD are a variety of different types of activities. If you plan to utilise some of your income for these activities in the past fiscal year, you can claim the amount as a tax advantage from your taxable amount.
5 Year Bank Fixed Deposit
It has long been a popular way to preserve money because fixed deposits (FDs) provide a fixed interest rate at maturity, are not affected by market fluctuations and have a predetermined maturity date. Depositary receipts (FDs) are an investment option offered by banks and other financial institutions. Over a period of time, investors would deposit large sums of money into this account. Customers would get a set interest rate for the duration of the investment in exchange. Interest rates on FDs are significantly higher than the interest rates on traditional savings accounts. FDs with a five-year lock-in period are the greatest choice for reducing taxable income under section 80C. Section 80C. A financial institution's CRISIL rating is an excellent place to start before buying in an FD from an NBFC.
National Saving Certificate (NSC)
The National Savings Council (NSC) is a government-endorsed tax-deductible investment that attempts to encourage small and medium-sized savings. It is supported by the Indian government and can be obtained at any Post Office. Because the Indian government is funding the programme, the danger is thought to be quite low. NRIs and HUFs are not eligible for the plan, which is only available to Indian citizens. The annual interest on the plan is credited when the certificate matures and is compounded each year. Invested returns are automatically re-invested because of interest compounding. Consequently, deductions of up to Rs 1.5 lakh are allowed.
Unit-Linked Insurance Plan (ULIP)
A ULIP is a type of investment vehicle that can be used for both insurance and investment purposes. It's a popular choice for tax-savvy investors. In order to use this product, customers must make recurring premium payments. A portion of the premiums is used to cover insurance costs, while the remainder is invested in stocks, bonds, or a combination of the two, together with money from other policyholders. Section 80C of the Indian Income Tax Act, 1961 allows for a deduction of up to Rs 1.5 lakh per financial year for ULIP premiums. The amount you receive at maturity is exempt from taxation under Section 10 (10D).
Senior Citizen Saving Scheme (SCSS)
For those over the age of 60, this Post Office savings plan offers good returns with no risk. The Post Office and certain banks provide this arrangement. The subscriber must be at least 60 years old at the time of signing up for a SCSS account. Certain groups of people can, nevertheless, benefit from a lowering of the retirement age. Savings of up to Rs 15 lakh in the SCSS account earn interest every three months. Section 80C of the Internal Revenue Code allows investors to deduct their contributions to the SCSS from their taxable income. The interest earned on SCSS is subject to taxation if it exceeds Rs 50,000 in a single financial year, according to the Post Office's official website.
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