Investments are essential for everyone, and to sustain and plan for the future, one must invest a substantial amount every month. Even though investment sounds a bit tricky to most of the people but with the right planning, one cannot just invest and grow their hard-earned money but can also save a lot on the taxes. An investor should always look for the sources generated tax-free income. While selecting the plans for savings taxes, one should look into the previous growth of the investment tools and the returns that have been provided so far. One crucial point that many investors miss out is, taxes levied by the government on the returns generated by the investments.
Tools like National Savings Certificate (NSC) and Senior Citizens Savings Scheme have a part where the interest income gets accumulated in the income part and is taxed by the government. Please note that the returns on the tax-saving products are lesser than the market returns, but over the period, they help in saving a lot in the taxes. There is a limit on the tax savings component of the investments, and one must thoroughly check the details before investing the money.
Some of the tax savings tools where you can park the money for good returns and can save on the taxes are discussed below:
Equity-Linked Savings Scheme: The amount invested in the ELSS has three years of the lock-in period, and the investor cannot withdraw the money. The investment made under the scheme accounts for the tax savings as per the income tax act, 1961. The maxim tax savings that can be done is Rs. 1,50,000 and multiple mutual fund houses offer the schemes for the tax savings of the investors.
Public Provident Fund (PPF): The most sought after-tax savings investment in India is PPF. The fund allows for the tax savings for up to Rs. 1,50,000 and the returns are guaranteed by the government of India. The returns currently offered on the PPF are 7.9% per annum, and the minimum tenure of the investment is 15 years and can be extended to another five years as well. PPF account can be opened in any of the public banks, post offices, and some of the private banks authorized by the government of India.
Unit Linked Insurance Plan: ULIP plans are considered to be the best investment tool to save money and get insurance security as well. The part of the premiums paid towards the ULIP scheme goes to get the insurance cover and the other part is invested in the market investment tools like debt, bonds, government securities, and stocks. The maximum tax savings that one can do through ULIP is Rs. 1,50,000.
Sukanya Samridhi Yojana: The scheme was launched by the government of India for the welfare of the girl child and can be opened by the parents to get higher returns and tax-free income. The minimum investment that can do is Rs. 250 and maximum Rs. 1,50,000 can be deposited in a financial year.
There are multiple schemes in the market to get higher tax-free returns. Still, one should carefully read the details to understand the investment risk and growth avenues.