As the tax season approach near, taxpayers all over get worked-up and tensed as nobody wants to shell extra money from their pockets. Taxpayers often try to find some way to minimize their gross tax payable. Thus, tax saving investments are an integral part in an investor’s life. As a smart investor, one should seek for investments that not only offer tax benefits but also tax-free income. Following are some of the best tax saving investment avenues under Section 80C of the Income Tax Act, 1961
Public Provident Fund (PPF)
It is a long-term tax saving scheme offered by the Government of India that aids in creating a financial cushion for investors post their retirement. The interest rate on PPF accounts is quarterly set. PPF enjoys an EEE status i.e. exempt, exempt and exempt. This basically means that the amount invested in PPF account, the interest accrued, and the maturity proceeds are all tax-exempt.
Unit Linked Investment Plan (ULIP)
ULIPs are a type of tax saving investments that not only offers the benefits of tax exemption but also higher gains on investment when invested for a longer duration. ULIPs offer the flexibility to switch between funds about 3-4 times in a year.
Equity Linked Savings Scheme (ELSS)
ELSS fund is a equity mutual fund investment that invests at least 80% of their corpus in equity and equity linked securities. ELSS mutual funds offer dual benefits of tax savings and capital appreciation when invested for a long duration. Hence, they are rightly termed as tax saving mutual funds. This tax saver mutual fund qualifies for a tax deduction of up to Rs1.5 lakh u/s 80C. If you invest in ELSS, you can save up to Rs46,800 each year.
Irrespective of the tax-saving investment you choose for your portfolio, make sure it aligns with your financial and personal goals, investment horizon and risk profile as an investor. Happy investing!