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When you earn a promotion, and obtain a hike in your salary, it’s always a reason for celebration. However, as your income grows, it’s also accompanied by a higher tax liability. Fortunately, the Income Tax Act offers a number of provisions to reduce the impact of higher taxes. By getting to know these provisions better, the average taxpayer can take advantage of the many tax-saving investments mentioned in the Act.
Investment under 80C and 80CCD is one of the easiest ways to minimize your tax burden. The investments that qualify under these sections are also excellent instruments to help your money grow over the years. If you’re keen on taking advantage of these provisions by making an investment under 80C or 80CCD, here are the best tax-saving investments given in the Income Tax Act.
Tax-Saving Fixed Deposits
Investing in tax-saving fixed deposits is by far one of the safest options for a taxpayer. Tax-saving fixed deposits are very similar to regular fixed deposits. However, the only difference lies in the lock-in period. Tax-saving FDs come with a fixed lock-in period of 5 years, which effectively means that you cannot liquidate the fixed deposit before the tenure ends. The principal amount that you lock into a tax-saving FD is not taxable and the interest earned from the deposit is taxable, depending on the slab in which your income falls.
Public Provident Fund (PPF)
Public Provident Fund is a great investment option for taxpayers looking to save up funds for the long-term. All of the deposits made into the PPF are backed by the Government of India, making this fund one of the safest options for investment under 80C. You also get a very attractive interest rate on your deposits, which is revised from time to time. Listed below are some of the points that you should know about PPF.
Equity Linked Savings Scheme (ELSS)
Equity Linked Savings Scheme (ELSS) is a specially crafted mutual fund scheme that invests your deposits in the equity market. This makes it a relatively high-risk option when compared with other 80C investments. Correspondingly, the rewards are also likely to be higher because ELSS has the ability to earn much higher returns. This makes ELSS the perfect investment option for the risk-aggressive investor who is interested in reducing the impact of tax. ELSS also has one of the lowest lock-in periods among 80C investment options. You only need to remain invested for 3 years to ensure that your tax benefits do not lapse.
Investing in a term insurance plan is a great way to reduce your tax liability as well as obtain a life cover. The premiums paid towards term insurance plans can be claimed as a deduction under 80C. Additionally, the tax benefits offered by term insurance plans are available to both individuals as well as HUFs. You can claim a deduction as long as the premium paid does not exceed 10% of the sum assured by the insurance policy. In case the premium paid exceeds the notified level, the deduction will be limited to 10% of the Sum Assured.
In addition to the above, the maturity benefits of a term insurance plan are also exempt from tax, owing to the provisions of section 10(10)D of the Income Tax Act. You can learn more about Life Insurance by browsing the website for the various Term Plans offered by PNB MetLife.
So, these are some of the best tax-saving investments under sections 80C and 80CCD. By parking your funds in these instruments, you can enjoy multiple benefits under the income tax act. Also, depending on the investments you choose, your funds grow over the years or your future is secured by a protective insurance cover. So, make sure to consider these options as part of your tax planning exercise.
Know more life insurance such as long term savings, term plan and retirement on PNB MetLife website.
The income tax is levied on all earning individuals who fall under a taxable income bracket. The income tax is paid to the Government of India and is charged annually. However, there are several tax deductions and exemptions that you can claim to lower your tax liability. The Income Tax Calculator helps you ascertain your tax output for a financial year based on your taxable income. This can help you plan well and save tax using the tax-saving deductions and exemptions, if possible.
The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities. *Tax benefits are subject to conditions and other provisions of the Indian tax laws and are subject to amendments made thereto from time to time.
PNB MetLife India Insurance Company Limited, Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka.
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Call us Toll-free at 1-800-425-6969 Phone: 080-66006969, Website: www.pnbmetlife.com, Email: email@example.com or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203
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As your trusted life insurance partner, PNB MetLife is with you amidst the current COVID-19 outbreak. Our policies also cover COVID-19 Claims. In case of a Death Claim, kindly submit the signed Claim Intimation Letter mentioning the policy number, brief of the insured event and other claim documents on the email mentioned herewith. Please write-in to us at firstname.lastname@example.org or email@example.com. You can also call us on 1800-425-6969 for death claims intimations and for any queries on Monday - Saturday between 10:00 am - 7:00 pm.
PNB MetLife Insurance, amongst the trusted Life Insurance companies in India, aims to provide a wide range of Life Insurance products that suits the needs of an individual at every stage of his life. Life Insurance Plans range from Term Life Insurance Plans, Term Plan, Protection Plans, Long Term Savings Plans , Retirement Plans & Child Education Plan.