7 Smart Tips For Investing In Income Tax Saving Before The Financial Year Ends

Introduction

Investing in tax-saving instruments is a great way to save money on your taxes. There are a number of tax-saving instruments available, each with its own set of benefits. While some of these instruments offer fixed returns, others offer the potential for capital appreciation.

Which tax-saving instrument is right for you depends on a number of factors, such as your age, investment horizon, and risk appetite. Here are 7 smart tips for investing in income tax saving before the financial year ends.

Save on taxes with an ELSS

: Equity Linked Savings Scheme (ELSS) is a type of mutual fund that invests primarily in equities. It has a lock-in period of 3 years, making it an ideal choice for long-term financial goals. Moreover, the gains from ELSS are tax-free, thus making it attractive for tax-payers. What’s more, ELSS offers the potential for capital appreciation, thus giving investors the potential for earning high returns on their investments.

Consider a health insurance policy

: A health insurance policy not only protects you and your family against health-related emergencies, it also helps you save on taxes. Under Section 80D of the Income Tax Act, you can claim deductions up to Rs. 25,000 for medical insurance (or) health check-ups. Moreover, if you pay your premium using an online mode, you can avail an additional deduction of up to Rs. 5,000. Thus, a health insurance policy can help you save on taxes while also protecting you and your family’s health.

Home is where the heart is

: Housing is an important part of life and investing in a house can help you save on taxes. Under Section 80C and Section 80EE of the Income Tax Act, you can claim deductions up to Rs. 3 lakh and Rs. 1.5 lakh respectively for principal repayment and interest on housing loan. Hence, investing in a house has dual benefits: it gives you a place to stay as well as helps you save on taxes.

Invest in NPS for long-term goals

: National Pension System (NPS) is a retirement savings scheme that allows subscribers to invest in a variety of investment options. Under Section 80CCD(1B), you can claim an additional deduction up to Rs. 50,000 for contributions to NPS. Thus, investing in NPS can help you save on taxes while also helping you achieve your retirement goals.

Don't forget about PPF

: Public Provident Fund (PPF) is a popular long-term investment option for risk-averse investors. Under Section 80C, you can claim deductions up to Rs. 1.5 lakh for investments in PPF. What’s more, the gains from PPF are tax-free up to a certain limit. Thus, PPF is an ideal choice for investors looking for tax-efficient returns.

Get the best of both worlds with NCDs

: Non-Convertible Debentures (NCDs) are a type of debt instruments that offer the potential for both capital appreciation and regular income. They offer higher returns than traditional bank deposits and are secure investments as they are backed by the issuer company. What’s more, the interest earned on NCDs is tax-free up to a certain limit, making them an ideal option for investors looking for tax-efficient returns.

To wrap things up

: Investing in income tax saving instruments can help you save taxes as well as meet your financial goals. Hence, it is important that you choose the right investment options. Consider factors such as your financial goals, risk appetite, and investment horizon before investing. Also, do not forget to make use of tax-saving options such as ELSS, PPF, Health Insurance, Housing Loans, etc. to get the most out of your investment.