A Complete Guide To Tax Saving Investment Schemes In 2022

The beginning of a fiscal year or a calendar year is the ideal time to initiate your tax-saving investments. Tax preparation is necessary, but it’s also critical to understand all tax savings options and pick the best one.

By investing in savings-oriented schemes or tax-saving investments you won’t have to pay more in taxes and can save a lot of money over the long term. In this article, we will discuss tax-saving investments, each of which may reduce your yearly income tax by up to Rs. 1.5 lakh rupees.

What Do We Mean By Tax Saving Investment Schemes?

The tax-saving season officially starts on April 1st for salaried and self-employed individuals. From a savings standpoint, a taxpayer should invest in tax-saving investments. In accordance with Section 80C or Section 80CC of the Income Tax Act of 1961, tax-saving plans provide multiple tax deductions. For instance, investing in tax free investments in India 2022 would enable you to save roughly Rs. 46,000 in taxes if your income is in the high-income tax bracket and your tax burden is charged at 30%. 

A lot of individuals think about investing in tax-saving investments. However, they believe a tax-saving investment offers modest returns with variable risks across various plans. The only viable tax-saving investment is the equity-linked savings plan (ELSS). While ELSS is a well-liked tax-saving investment choice depending on your risk tolerance and investment goals, it is not the only tax-saving programme accessible to Indian taxpayers.

What Are The Best Tax Saving Investments Available In India?

Some of the best tax-saving investments available in India under Section 80C of the Income Tax Act of 1961 are as follows:

  • Public Provident Fund (PPF)
  • National Savings Certificate (NSC)
  • Equity Linked Savings Scheme (ELSS)
  • Sukanya Samriddhi Yojana (SSY)
  • Employee’s Provident Fund (EPF)
  • National Pension System (NPS)
  • Unit Linked Insurance Plan (ULIP)

Detailed Insight On The Best Tax Saving Investments Available In India

Public Provident Fund (PPF)

One of the most secure investment alternatives to start with that can support retirement security and tax reduction is PPF. A PPF account can be opened for as low as 500 with a 15-year minimum term. A PPF account can be opened at any nationalized bank or at a post office. The principal amount invested in a PPF account is free from income tax and the highest deduction available to taxpayers is 1.5 lakh rupees.

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National Savings Certificate (NSC)

You may create an NSC investment plan with any post office outlet to save on your fixed-income taxes. This tax saving investment scheme is comparatively safer because it is an effort from the government of India. Section 80C of the Income Tax Act allows for a deduction of up to 1.50 lakh rupees for investments made in NSC.

These certificates provide a set yearly interest rate of around 6.8% (updated every quarter by the government), ensuring a consistent income for the account holder or investor. Five-year and ten-year certifications are available under the system.

ELSS Mutual Fund

Equity-linked saving scheme (ELSS) mutual funds are a particular class of mutual funds that invests largely in equities. Investors can also receive tax advantages through ELSS. Section 80C of the Income Tax Act of 1961 allows for a tax deduction on investments made in the plan up to a maximum of 1.5 lakh. 

Sukanya Samridhi Yojana

As part of the “Beti Bachao, Beti Padhao” programme, the Indian government is offering a modest deposit scheme to parents of girls. The programme encourages parents to start a fund to cover their female child’s future school and wedding costs.

The Sukanya Samridhi Yojana plan provides tax deductions of up to 1.5 lakh rupees and interest rates of up to 7.6%. Any Indian post office or branch of any recognised commercial bank is able to open a Sukanya Samridhi Yojana account.

National Pension Scheme (NPS)

The Indian government introduced the NPS pension and investment programme to give its citizens security as they age. Both government and private sector employees can save money on taxes with this tax-saving investment. It is open to all citizens between the ages of 18 and 60. 

The depositor’s money is invested in a variety of plans, including the equity markets. The National Pension Scheme offers a basic deduction of up to 1.5 lakh. The total tax deduction amount can be increased to 2 lakh thanks to NPS, which permits an extra 50,000 deduction under section 80CCD (1B).

Unit Linked Insurance Plan (ULIP)

Unlike a traditional insurance policy, a ULIP offers investors both insurance and investment opportunities under a single integrated plan. The policyholder pays a specified portion of the premium, which is used to provide insurance coverage, and the remaining sum is invested in equities and debt instruments. Tax deductions are also available with ULIP up to 1.5 lakh.

To Conclude

If you want to save taxes then remember that there are multiple tax-saving investments available in India. However, you need to start early on to be more precise at the beginning of the fiscal year. More importantly, you will not only save a lot of money on taxes, but you will also be able to save for your retirement.

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