The end of a fiscal year is a critical period for many businesses and individuals. However, as individuals, we are only aware of the deadline for filing our income tax forms. Many people still rush to make adjustments, discover receipts, and forget about planning for the next year’s tax payments as soon as their income tax return is completed. But did you know that by making certain investments you can lower your income tax? This is possible through tax saving investment.
Tax preparation is an essential component of financial planning. An educated tax saving investment com with a tax-planning strategy that can help individuals reach their financial goals while also saving money on taxes.
Tax saving investment and sections:
- Fixed deposit
By making investments in fixed deposits that abide by Section 80C of the Indian Income Tax Act of 1961, you can lower your tax obligation. If you invest in income term deposit, you can reclaim up to Rs. 1.5 lakh from your investment. These FDs have a lock-in length of five years, and the interest they produce is taxable. Typically, interest rates range from 5.5% to 7.75%.
- PPF ( Public provident scheme )
A well-known tax saving investment option for everyoneis Public Provident Scheme is. At the post office or authorized offices of public and private sector banks, open a PPF account to get started with this long-term savings and investment option. Investments put to the PPF account are subject to a predetermined rate of return. These deposits are eligible for Section 80C deductions of up to Rs 1.5 lakh every financial annum.
- ULIP (Unit linked insurance plan)
ULIPs are long-term tax saving investment products that let you invest in either debt or equity funds or a combination of the two. ULIPs let you switch between funds in accordance with your financial objectives. You can invest in ULIPs to reduce your tax liability under the Income Tax Act of 1961 sections 80C and 10(10D).
- Certificate of National Savings
With National Savings Certificates, low- to middle-income investors can invest while saving money on income taxes according to Section 80C. A person having an account with any bank and also getting access to online banking, is liable to get NSC certificates in online mode. Investors have the option of purchasing NSCs on their own behalf, for the benefit of minors, or in a joint bank account with some other adult.
- Senior Citizens Savings Plan
For people over 60, the Senior Citizen Savings Scheme (SCSS) is a government-sponsored savings program that offers a reliable and stable source of income throughout the post-retirement period and also yields comparatively decent rates.
The principal amount deposited in an SCSS account is tax deductible up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act, 1961. However, this exception is only applicable under the current tax scheme. A person is not allowed to file tax returns using the new procedure mentioned in Union Budget 2020.
However, the interest received is taxable in accordance with the relevant taxpayer’s statutory tax slab.