The recent COVID-19 pandemic has motivated several investors to create a sound financial plan for themselves and also help them save tax on their investments. Come year end, and investors rush to choose the best investment plans that can help them save tax. If you are one such investors, don’t worry. In this article, we will offer you five investment options that can help you save tax on your investments:
Investment plans to save tax
Here are a few investment plans that can help an investor save tax on their investments:
- ELSS funds
Also known as tax saving mutual funds, ELSS, short for Equity-Linked Savings Schemes can be an ideal investment option for investors looking to decrease their tax outgo. As these mutual funds are a part of Section 80C investments, these funds are eligible for a tax deduction of up to Rs 1,50,000 each year. ELSS mutual funds also enjoy the lowest mandatory lock-in period among other Section 80C investments at just three years, making them quite desirable among retail investors.
- National Savings Certificate (NSC)
Investors with a low risk profile might consider allotting their assets to national savings certificate. These fixed-income instruments can be opened at any post office. Backed by the government of India, NSC schemes offer a fixed rate of interest to investors, making them a desirable investment product among risk-averse investors. Apart from that, these schemes also offer the tax deduction of up to Rs 1.5 lac per annum to investors.
- Public Provident Fund (PPF)
Offered by the government of India, PPF scheme is a retirement scheme that aims to offer a secured post-retirement life to investors. As these schemes offer fixed and assured returns to investors, it is an ideal investment option for investors with a low-risk appetite. PPF schemes might also be ideal for someone with a long-term investment horizon. This is because these schemes have a mandatory investment duration of 15 years, which might be further extended by five years.
- Sukanya Samridhi Yojana (SSY)
Launched by the Indian government as a part of the ‘Beti Bachao, Beti Padhao’ campaign, SSY schemes aim to provide a bright and secure future to a girl child in India. The legal guardian or the parent can open an SSY account for their girl child provided that she is less than ten years old. This scheme can be helpful for one to generate expense against the education and marriage of the girl child once they attain the legal age.
- Tax saving fixed deposits (FD) – These tax-saving investments can be suitable for those looking to diminish their taxable income. These investment options have a mandatory lock-in period of five years. The government predetermines the interest rates on tax saving FDs before the commencement of the scheme. As these schemes are backed by the Indian government, they offer fixed and assured returns to investors.
One should ensure that they do not invest in tax-saving investments for the sole purpose of saving tax. The objectives of the scheme must be aligned with your financial goals, risk profile, and investment horizon. Happy investing!
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