To achieve you long-term financial goals, it is important to start exploring and planning tax-saving investment options and the best way to invest money at the beginning of the new fiscal year. Doing this will help your investments to compound, as it gives you enough time, aiding your long-term goals.
If you want to choose the best investment plan and save tax for the new financial year of 2019-2020, here are some tax saving investments and instruments that are covered under Section 80C of the Income Tax Act. These allow you to claim a deduction up to Rs. 1.5 lakh from your total taxable income:
- Employee/Voluntary Provident Fund (EPF/VPF): These options save tax, as in EPF and VPF the employer deducts the amount contributed from an employee’s salary; these contributions are regarded as tax deductions.
- Public Provident Fund (PPF): In a PPF account opened in any bank or post office, you need to deposit a minimum of Rs. 500 to a maximum of Rs. 1.5 lakh at least once annually. The lock-in period is 15 years, and partial withdrawals are allowed after 7 years. This option saves tax as the PPF contributions as well as the total amount on you receive on maturity are both tax-free.
- Sukanya Samriddhi Account: If you are a parent, you can open an account in your daughter’s name when she is 10 years old, depositing up to Rs. 1.5 lakh per year. The account will remain active till she gets married after turning 18, or till she is 21 years old. At 18 years, the parents can withdraw 50% of the amount. The amount is tax-exempted.
- 5-Years Tax saving fixed deposit in banks/post offices: Another tax-saving option; these tax-saving FDs offered by banks have a lock-in period of 5 years. However, the interest is taxable.
- Life Insurance Premium: Different types of Life insurance premiums can be availed, that are eligible for tax exemptions. Up to Rs. 1.5 lakh p.a. can be claimed towards insurance premium.
- National Pension Scheme (NPS): This government initiative is an important tax-saving investment, with good tax benefits under Section 80C, 80CCC, 80CCD(1), 80CCD(1B), or 80CCD(2). It offers pension to individuals in unorganized sectors, or professionals without pension facilities.
- Equity-Linked saving scheme (ELSS): ELSS offers higher returns than many other saving options, and is the most coveted tax-saving instrument option under Section 80C. In this scheme, each installment is regarded as a new investment and has to follow the minimum lock-in period of 3 years.
- Home Loans: Another tax-saving option; the principal amount and the interest of the home loan EMI are qualified for deduction, and a part of it falls under Section 80C. The rest can be claimed under Sections 24 and 80EE.
- Unit-Linked Investment Plan (ULIP): ULIP is a single integrated plan for investment and insurance, in which a partial amount is invested in the stock market. It gives high returns and tax benefits.
- Tuition Fees for two children: There is relief available in the form of tax deductions for amount paid as tuition fees for your children, since the education cost is rapidly increasing in India.