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TAX SAVINGS INSTRUMENTS – Let’s Save

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TAX SAVINGS INSTRUMENT

You can end-up saving tax by investing in PPF, ELSS Funds, 5-year Bank FDs, NPS, ULIPs, and NSCs. Let’s know them in detail. Here: 

  • Public Provident Fund or PPFPublic Provident Fund or PPF was introduced in 1968 in India with the aim to mobilize savings in the form of investment, coupled with better returns. It can also be called as a savings-cum-tax-savings investment that helps in building a retirement corpus whilst saving on annual taxes. Public Provident Fund or PPF is a long-term investment option which offers better returns and interest rate on the amount invested. The returns and interest rate are not taxable under the income tax. The person has to open a PPF account and the amount deposited yearly will be claimed under 80C.  The contribution is INR 500 (minimum) and INR 1.5 lakh (maximum).  
  • Equity Lined Savings Scheme or ELSSELSS or Equity Linked Savings Scheme is one of the best tax-saving instruments that are popular amongst investors since they act as a helping hand to create wealth in the long-run and saving tax. Whilst saving being the priority in the tax saving year, ELSS become the goal for the investment; also, helps in meeting long-term goals as well like retirement, children’s education, buying a house or car. Under section 80c of the Income Tax Act, an individual can claim a tax deduction of up-to 1,50,000 INR per year. 
  • 5-Year Tax-Saver FDsThe Fixed Deposits are available with the post offices and major banks in India. The rate of interest ranges from 6% to 7%. They have a lock-in-period of 5 years and interest on these are fully taxable. However, the rate of interest on a tax-saver fixed deposit made with post office is not taxable (confirm with the same before opting).  
  • National Savings Certificate or NSCNational Savings Certificate or NSC is a fixed income-investment scheme which you can open in any post office. You can buy it for a minor/or with another adult as a joint-account. NSC comes with two maturity periods – 5 and 10 years and there is no maximum limit of NSCs, but you can earn tax-break up to Rs. 1.5 lakh under section 80C. Currently, the rate of interest is 8%. 
  • National Pension System or NPS: National Pension System or NPS is counted as tax-saving instruments. NPS contribution are entitled for tax-deduction up to INR 1.5 lakh under section 80CCD and up to INR 50,000 under section CCD(1B). NPS contributions can be invested in corporate bonds, government bonds, and equities through an NPS pension fund. The minimum annual contribution of NPS is INR 1000.  
  • Unit Linked Insurance Plans or ULIPsUnit Linked Insurance Plans or ULIPs offer you a combination of investment and life insurance. These insurance policies have a lock-in-period of 5 years & tenure from 5-30 years. The applicant will be required to pay premium for at-least 5 years. ULIP is a tax-saving investment that allows you to switch between debt and equity 
INVESTMENT  RETURNS 

LOCK-IN-PERIOD 

     
5 Year Bank Fixed Deposit  6%-7%  5 years 
Public Provident Fund  7%-8%  15 years 
National Savings Certificate  7%-8%  5 years 
National Pension System  12%-14%  Till retirement 
ELSS Funds  15%-18%  3 years 

Source: cleartax

Now, that you know about tax savings instruments, make sure you are careful enough to opt for tax-exemption.

Invest in ELSS Fund & Save Your Tax Under 80C with Gulaq.com

*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.

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