Tax Saving Investments

Tax Saving Investments

Tax saving investments in India are an integral part of financial planning for  individuals and businesses alike. Section 80C, 80D, 80CCD (1B), 24(b), 80TTA/ 80TTB, and 10 (10D) under the Income Tax Act, 1961 are some of the significant tax saving sections. By strategically allocating funds to these investments, you not only reduce your tax liabilities but also build wealth over time.

Section 80C: Allows deductions for investments in instruments such as Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), National Savings Certificate (NSC), tax-saving fixed deposits, and life insurance premiums.

Section 80D: Provides deductions for health insurance premiums paid for self, spouse, children, and parents, along with preventive health check-up expenses.

Section 80CCD (1B): Allows additional deductions for contributions made to the National Pension System (NPS) over and above the limit under Section 80C.

Section 24(b): Offers deductions on home loan interest payments, including both self-occupied and let-out properties.

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Key Features & Benefits of Tax Saving Investments

Public Provident Fund (PPF)

Returns: Typically around 7-8% per annum (varies quarterly as decided by the government).

Tax Benefits: Contributions are eligible for tax deduction under Section 80C up to INR 1.5 lakh per year

Employee Provident Fund (EPF)

Tax Benefits: Contributions by the employee are eligible for deduction under Section 80C.

Tax on Profits: Interest and maturity proceeds are tax-free if the continuous service period is at least 5 year

National Savings Certificate (NSC)

Returns: Approximately 6-7% per annum.

Tax Benefits: Investments are eligible for tax deduction under Section 80C.

Tax on Profits: Interest earned is taxable but qualifies for deduction under Section 80C during the accumulation phas

Equity-Linked Savings Scheme (ELSS)

Returns: Market-linked, historically around 12-15% per annum.

Tax Benefits: Investments are eligible for tax deduction under Section 80C.

Tax on Profits: Long-term capital gains (LTCG) up to INR 1 lakh per annum are tax-free; gains above this limit are taxed at 10% without the benefit of indexation

Unit Linked Insurance Plans (ULIPs)

Returns: Market-linked, varying based on the performance of the underlying funds.

Tax Benefits: Premiums paid are eligible for tax deduction under Section 80C.

Tax on Profits: Maturity proceeds are tax-free under Section 10(10D) if the premium is less than 10% of the sum assured, subject to certain conditions

Sukanya Samriddhi Yojana (SSY)

Returns: Around 7-8% per annum (varies quarterly as decided by the government).

Tax Benefits: Contributions are eligible for tax deduction under Section 80C.

Tax on Profits: Interest earned and the maturity amount are tax-free