Best Tax Saving Schemes You Need to Know
Tax saving is an integral part of every professional life. There are plenty of tax deductions schemes under Section 80C of Income Tax 1961. Considering these investment schemes is essential as it can help you in leading a stress-free life.
A smart investor should know about the investment schemes under the act to receive the maximum tax benefits. Tax planning is better if you consider it early. With early tax planning, it is possible to keep your finances stable. With the tax saving schemes, you can earn tax-free income and other added rewards. Now let us take a look at the top beneficial tax savings schemes under Section 80C.
The provisions under the Section 80C
It is a known fact that investing in financial instruments helps to reduce taxable income. These tax-saving schemes are not only for tax deductions but useful to create wealth during the policy period. Under Section 80C, there are investment schemes that provide tax deduction options. The payments eligible for tax under Section 80C are as follows:
● The payments toward insurance
If you are a term insurance policyholder, then the premium paid in your name or family members is exemptible from tax. The total amount of exemption under Section 80C is 10%.
● For the payments towards home loan
You can use the insurance policy sum to pay off the home loan. Also, it is exemptible from tax under section 80C.
● For the payment of education fees
Under section 80C, if you invest in any tax saving scheme, it is possible to use the accrued sum for education fees. These payments are exemptible from tax under the income tax act.
The tax saving schemes to choose under the section 80C
1. The mutual fund scheme
A mutual fund scheme is an investment and tax-saving scheme that comes with plenty of tax benefits. The maximum tax exemption available in the mutual fund saving is INR 1.5 lakh. The starting term lock-in period for the scheme is three years. There is both flexibility and liquidity in this investment. The tax exemption rate is higher in the mutual fund scheme as compared to other investment schemes.
2. The national pension scheme
There are three different tax exemptions available under the national pension scheme. Under the Section 80C Act, it is possible to get INR 1.5 lakh tax exemptions from it. There is also an additional tax deduction of up to INR 50,000/- available under this scheme. If you are a policyholder in the NPS scheme, then the premium paid for this is exemptible up to 10%. You can experience the triple tax benefits when opting for the national pension scheme.
3. The unit-linked insurance scheme
The ULIP is another tax-saving scheme that provides tax exemptions and higher returns. The zero-premium rates are the features of this insurance scheme. The lock-in period of this policy is five years and comes with the ease of investment payment methods. There are plenty of fund opportunities to choose from the investment scheme. You get both rewards and tax advantages when selecting this policy.
4. The public provident fund
The public provident fund is a long-term tax-saving scheme for all working professionals. There is also strong government backing for this particular investment scheme. The interests earned, the maturity amount, and all the other payments made towards this investment are fully exemptible from tax. It is one of the best long-term tax-saving schemes under Section 80C. The investment lock-in period of the provident fund scheme starts from 5 years. Withdrawal from the PPF account is possible and exemptible from tax.
5. The insurance policies
Life insurance is one of the policies that come with excellent tax-saving benefits. It is not only a policy for tax saving but also comes with plenty of other financial benefits. The endowments and the return backs from the insurance are free from tax. Under the life insurance policy, the total exemptible amount is INR 1.5 lakh. There are also plenty of insurance riders that provide additional tax benefits.
Conclusion
The tax-saving schemes are beneficial for any working professionals. Most of these tax schemes have government backing that makes them highly reliable. They are also ideal if you want to build wealth.