How to Save Taxes in India by Investment

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Save Tax by Planned Investments

Every individual citizen who earns a salary or even is a non-salaried entrepreneur, he/she is liable to tax. There is never a season to plan on saving tax by investing right and tax planning right at the end of the financial year. It is always wise to know and prepare to save the investor’s tax liability no matter what the season is coming on too. Even though planning anytime is an available option. It is considered best to plan it in advance to avoid financial blunders that may coast a quite.

Investments need to be weighed out properly in the context of all the risk-bearing aspects. Making an investment without proper knowledge about the market and without planning on tax savings on your returns will evidently make a huge dent in your hard earned capital.

Tax Saving Mantras

While making tax saving plans, the investor must keep the following things in mind:

Saving tax to the maximum extent
Calculation of the least amount of risk possibilities
Cutting the cost of investments
Stabilized returns.

Tax Exempted Investment Options

Under Section 80C of the Income Tax Act, 1961, is the act under which all the investment options function in regards to the rules of this particular act. Few of the investment options are not liable to tax payment. Not all of the policies hold this benefit. Only certain investment options are eligible for tax deductions under sec80C such as:

Fixed deposit
Public provident fund
Life insurance
Equity-linked savings scheme
National savings scheme
Bonds

These investment options hold a certain level of exemption on the tax basis. Mostly the upper level of exemption is up to 1 lakh, the tax liability will be exempted when the amount reaches maturity.

Let’s take a look at the tax slab, to know more about what category of tax liability that you fall into.

Note: A tax slab is the criterion of tax percentage charged by the Government against different amounts of income earned by the citizens.

Tax saving plan How to Save Taxes in India by Investment

Based on this slab, the investor is eligible for tax payments.

direct mutual fund How to Save Taxes in India by Investment

Smart Tax Savings Investments

ELSS Tax Saving Mutual Funds

The equity-linked savings scheme mutual fund is a special fund designed exclusively to be exempted from tax liability in order to save tax. Though its performance depends on the market activity, which makes it volatile to risks, but the returns make it up for the risk factors.
It is one of the best tax saving schemes based on equity segment with the shortest lock-in period of 3 years.

Systematic investment plans are also a part of ELSS, where the investor can make minimum investments without the risk of tax payments.

Health Insurance Tax Saving Investments

Even though health insurance does not give the investor any returns in the form of money, it offers protection and stability towards one’s health.

According to section 80D of Income tax act, 1961, the premium that the investor pays is tax deductible. The upper limit for deduction is from Rs.15,000/- to Rs.20,000/- for senior citizens.

Public Provident Fund Tax Saving Plans

It is a long-term saving scheme completely exempt from tax liability. It is issued by the central Government. The upper limit is up to Rs.70,000/- with 8% of interest, in addition, the returns that the investor claims when the maturity period arrives is absolutely and completely exempted from tax. The only drawback that this scheme has is, it has a lock-in period of 15 years. Hence, any withdrawals are not possible in the middle.

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