Making tax saving investments has become an integral part of every person under section 80C or 80CCC under the Income Tax Act. The importance of these investments makes people frequently wish to invest. But the low returns often make them consider other options and the different risks associated with investments. The tax-saving season starts at the beginning of April for the masses. Though there are many saving options, people often get confused. Let us check at the best options that can save tax and earn profits for you.
- Equity Linked Savings Scheme or ELSS mutual funds
The tax saving ELSS is a diversified mutual fund scheme with two different features. Firstly, the investments in the ELSS scheme offer tax exemption upto a maximum of Rs. 1.5 lakh under the section 80C of the Income Tax Act. These investments have a lock-in period of 3 years. On top of that, the ELSS funds offer return rates in the range of 15%. However, the returns are not fixed and vary according to the performance of the market. The investors can opt for dividend or growth option in the ELSS funds according to the goals of the investor. To mitigate risks, investors can diversify their investments in multiple ELSS.
- National Pension Scheme
Though tax saving ELSS is definitely the best choice for investors, the National Pension Scheme can be referred to as the runner up. This scheme offers tax exemption under 3 different sections – a maximum of Rs. 1.5 lakh for tax exemption under section 80C and an additional 50,000 under section 80CCD (1b). Also, if 10% of the basic salary of the individual is contributed by the employer in the National Pension Scheme, the amount is not taxed. This has increased the popularity of NPS. However, only 40% of the fund is tax exempted at the time of maturity.
- Unit Linked Insurance Plan
ULIPs are tax saving investments as well. They not only provide the benefits of tax exemption to investors but offer good returns on long term investments. The new ULIPs do not have asset allocation charges. Also administration charges are nil. Thus, investors get much better returns. Also, the combined benefit of insurance and investments will make you doubt if they get the upper hand over tax saving ELSS. These plans have a lock-in period of 5 years. The investors also get flexibility as there is a wide range of funds to choose from.
- Public Provident Fund
PPF is a popular tax saving long term investment plan. The interest rate on the PPF balance is reset every quarter. The Public Provident Fund enjoys a complete exemption of income tax. The contribution made to the PPF account, the interests earned and the maturity proceeds are completely tax exempted. This is why it is one of the best investment products to save tax. PPF has a maturity period of 15 years and can be extended for 5 years.
These are some of the popular tax saving options that can earn good profits for you. Even for the entertainment industry, it is useful to start a corporation for tax and liability purposes