In this article we are providing the best Tax saving Investments so that you can save tax. Every year, most of the taxpayers are entangled in a situation where they have to choose from many available options, advices from various sources which are often contradictory and there is a deadline they have to adhere to in order to pay off their taxes. That is something which is common to most of us and is a cause of concern for every individual.
Although there is no sure shot methodology on tax saving investments and the strategy may differ from person to person, you may still follow few of the tips given below that are quite common forms of investment under 80C section based on safety, returns, liquidity, flexibility and taxability. It is noteworthy that every form of investment has its own merits and demits and the relevance may depend on individual’s requirements and choice.
3 Best Tax Saving Investments
PPF tops the list
One of the safest options investment gurus suggest in India is the PPF. They may not really have a very high return, but they are entirely tax free and they offer a realistic range of flexibility as well as liquidity by virtue of their withdrawals and loan facilities. So, PPF holds the number one in best tax saving investments in India.
PPF has always been a smart saving investment, but with it being linked to bond yields, it has become the most preferred choice for many. The linking to bond yields has made it stand in line with the existing market rates and thus the only drawback it had has been taken care of.
Along with this, PPF offers a wide range of flexibility to the investors. Anyone can walk into any post office or any bank and open a PPF account and for the respite of investors, the commission which earlier used to go to the agents has been discontinued. On the other hand, you would yourself have to manage the paperwork for opening the account.
One of the biggest advantages that PPF offers is that you can take a loan of up to 25 per cent of the amount. The loan would be charged with not more than 2 per cent for the first 36 months and 6 per cent there after.
- Equity linked saving schemes (ELSS)
ELSS secures the second position in best tax saving options since they offer a high range of liquidity and flexibility along with being a high return investment with tax saving options. One of the best benefits ELSS offers to the investors is that it has the least lock-in period, which is around three years. Moreover, these are equity funds and offer a great return over a longer period.
On the flip side, with higher returns comes higher risk. The limitation or say drawback of ELSS is that it does not guarantee that you would have a positive return on your investment. If you have a look at the past few years, even the best plans has not been able to churn our good returns and vice-versa. Hence, it certainly is a risky affair and only those investors who have the appetite to play with risk factor should opt for this option.
- RGESS: Great option for amateur Equity Investors
Amateur investors can expect to earn as high as twelve lakh in a year tax saving through this newly launched scheme under Section 80CCG. For those investing in RGESS, they can claim a deduction of fifty per cent on the amount invested. However, the maximum deduction, which one can opt for is not beyond Rs 25,000 since the maximum investment you can do is Rs 50,000 only.
Apart from the investment options mentioned above, you can also opt for ULIPs, Voluntary PF, Senior Citizen’s Saving Schemes and NSCs and Bank FDs. There are varied options for investment. However, the point remains that not all options may suit everyone. Keeping in mind the tax your want to save and the income you have, the choices may change altogether.