5 best Tax saving investment in India

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According to Alfred E. Neuman, “Today, it takes more brains and efforts to make out the income-tax form than it does to make the income.” The statement stands highly appropriate as even in India people are either not aware of the entire income tax theory or they purposely choose to evade income tax for some extra savings. Evading income tax is illegal and the entire amount hidden to evade income tax is known as black money. The 2019-2020 Budget announced by the Narendra Modi government, the income tax slab was increased from 2.5 lakhs to 5 lakhs. The provision, however, states that the income excludes the investments made by the individual. To save tax, you need to look out for an investment that guarantees returns and has low risks. Here are 5 best tax saving investment in India that can help you get profitable returns.

1. Equity Linked Saving Schemes (ELLS)

Equity Linked Saving Schemes are just like any other mutual fund schemes, but they offer tax exemption of up to 1.5 lakhs per annum on investment. Returns on ELLS range between 12-15% if the funds are invested for 5-8 years of time period. These returns are not fixed though and are highly dependent on the equity market. ELLS may differ from mutual funds in terms of lock-in period. The lock-in period for ELLS is 3 years minimum.

2. Public Provident Fund (PPF)

PPF is one of the oldest and still relevant ways of investment to save tax. PPF provides an interest rate of 8% per annum currently and offers tax exemption of up to 1.5 lakhs. The lock-in period is of 15 years. However, loan facilities can be availed between 3rd and 5th financial year with 2% interest to be paid on the loan. Investors are open to the option of withdrawal after the 6th year.

3. Sukanya Samriddhi Account Scheme

This investment is only open to parents having a girl child and is beneficial as well. If a parent has a girl child, they can invest up to 1.5 lakhs in Sukanya Samriddhi Account Scheme and avail higher interests than the normal bank accounts. As per the data recorded in 2018, the interest for Oct-Dec was 8.5%. Parents or guardians can make deposits until the child is aged 15 years and the account matures once the girl is 21 years of age.

4. Health Insurance

Health insurance is the most important and prominent way of tax saving. Not only does it exempt you from paying tax but the added benefit here is that it covers your medical expenses and provides you with health care solutions in times of an emergency. Online health insurance plans can easily be availed through insurance websites.

5. Tax Saver FD Schemes

Tax Saver FD schemes are one of the most opted and traditional investment to save you from paying taxes. Under the 80C section of the IT act, by investing in FDs investors can claim a deductible amount of 1.5 lakhs to exempt them from paying taxes. The government has been improving the interest rates of FD schemes. Post Office Tax Saving FD Schemes provide an interest of 8% p.a. currently. The lock-in period for this scheme is of 5 years.