Effective Tax Savings Investments

“Do not put all your eggs in one basket” goes the saying. It is vital to invest in formidable assets, and portfolio management comes in handy. But often, people make wrong choices while choosing the type of investments every year. Most times, the employees and the self-employees are seen rushing to make up an investment, merely to save taxes.

While it is important to save, it is also important for common sense to prevail while making those important choices.

Before planning tax investments for the year, the individuals should primarily evaluate the factors of their living conditions and the choices of tax savings that will give the optimal results. Most get carried away with the fancy concept called asset management, but before they do that, it’s time to actually draw up the personal priorities.

There are some robust tax savings instruments which have proved yields over the test of time. Take a look at some of them

Life Insurance Policies

This is one of the most effective policies where a life is covered for the individual and the nominees in the form of a year wise scheme. The premiums can be paid in different ways – monthly, quarterly and annual, and the same is deductible up to 1 Lakh rupees under the Section 80 C of the Income Tax Act. The life gets covered as the tax is saved, giving a great advantage to the saving.

Pension Plan

Pension Plans account for tax deductions under Section 80C of the Income Tax Act since 2013. It is preferable to choose a government owned national pension scheme to derive the most as compared to a private one.

National Savings Certificates (NSC)

The NSC s are said to be one of the most reliable forms of savings. These are the financial instruments that are tax free deposits under section 80C of the Income Tax Act. The recent changes in the regulation made by the Government of India offers deduction of upto INR 10,000 on the interest earned in the Savings Bank Account.

Fixed Deposits

Similar to NSCs the FD are the dependable ways to save money as well as cut down on the Tax.

Senior Citizen Saving Scheme (SCSS)

A Tax saving method for the elder citizens, this scheme offers 9 percent returns on deposits. This scheme is only for the individuals above the age of 60 years. However, the total amount of investment cannot cross INR 15 lakh. The SCSS scheme gets into tax deduction, but the interest earned on this investment is fully taxable.

Unit Linked Insurance Plan (UILPS)

Linked with equity, ULIPS operates on market performance while linked with an insurance scheme. It caters to the tax saving but there are few disadvantages. ULIPS demand higher premiums and offer no flexibility when one wants to take a break in making the premium payments.

Public provident Fund (PPF)

One of the topmost methods and time tested methods, PPF offers returns at par with other instruments in the market. The advantages of PPF include tax free interest, easy account opening and guaranteed liquidity. Ideal for high risk investors and the self-employed, PPF comes as a boon.

Equity Linked Savings Scheme (ELSS)

ELSS offers good returns while saving tax, but comes with preset conditions. There is a three year lock in period for this instrument. The returns on this investment are speculative as they perform based on the stock market conditions.

Voluntary PF

The fund linked with employer in each financial year sees contribution from both the employer and the employee going into it. The employer deducts 12 percent of the basic pay and dearness allowance for the salary to the employee’s voluntary PF account.

New Pension Scheme

Perfect for retirement benefits, the tax deductions are allowed only for contributors to a tier I NPS Account which has a minimum balance of INR 6000 every year. The investors cannot withdraw any funds from this account till they reach 60 years of age.

Rajiv Gandhi Equity Saving Scheme

This instrument provides annual tax savings where the first time investor can claim a 50 percent deduction from the amount invested. The maximum investment one has to make is INR 50,000 and the maximum deduction being INR 25,000. This deduction is applicable only for the 1 Lakh limit under Section 80C.