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F-14/15, Orbit Mall, Civil Lines, Jaipur-302006 support@thetaxheaven.comBenjamin Franklin once said, “There are just two things certain in life: Death and Taxes.” While we cannot plan much for the former, we can certainly strategize and optimize the latter. Understanding how much tax you pay annually and planning accordingly can help you save a significant amount.
Tax-saving investment schemes not only reduce your taxable income but also help grow your wealth to meet your financial goals. As the financial year 2024-25 nears its end, time is running out to make tax-saving investments. Tax2win is here to assist you in maximizing your tax savings. Tax2win has introduced India's first tax-saving tool, the “Tax Planning Optimizer,” which provides step-by-step guidance on saving taxes by recommending suitable investments and savings plans. This tool is designed for all taxpayers, regardless of their income level or the complexity of their tax affairs.
| Tax-Saving Investment | Returns | Lock-in Tenure |
|---|---|---|
| ELSS Fund | Not Fixed | 3 years |
| National Pension Scheme (NPS) | 9% to 12% | Till Retirement |
| Unit Linked Insurance Plan (ULIP) | Not Fixed | 5 years |
| Public Provident Fund (PPF) | 7.1% (as of today) | 15 years |
| Sukanya Samriddhi Yojana | 7.6% | 21 years or till marriage |
| National Savings Certificate | 6.8% | 5 years |
| Senior Citizen Saving Scheme | 7.4% | 5 years |
| Bank FDs | 5.5% to 7.75% | 5 years |
Note: NPS has a separate section 80CCD(1B) that allows an additional deduction of Rs. 50,000 over and above the Rs. 1.5 lakh limit of section 80C.
ELSS is a tax-saving investment under Section 80C with two key benefits. First, the investment amount under ELSS is eligible for tax exemption up to Rs. 1.5 lakh. Second, it has a lock-in period of just three years, making it one of the most flexible tax-saving options.
ELSS funds offer an annual return of approximately 5%-18%, though returns are not fixed and depend on market performance. ELSS investments offer liquidity, flexibility, and potential high returns, making them ideal for investors willing to take some risks.
The gains from ELSS are subject to long-term capital gains tax (LTCG) at 10% if they exceed Rs. 1 lakh in a financial year. Since market conditions impact ELSS performance, investors should carefully select funds that have performed well in both bullish and bearish markets.
Regulated by the Pension Funds Regulatory and Development Authority (PFRDA), the National Pension Scheme (NPS) is a retirement-focused investment plan available for both government and private-sector employees. Any individual between the ages of 18-70 can participate in NPS.
NPS has low fund management charges and offers investment options across equity, corporate bonds, government securities, and alternative investment funds (AIFs).
NPS provides tax deductions of up to Rs. 1.5 lakh under Section 80C and an additional Rs. 50,000 under Section 80CCD(1B), bringing the total tax benefit to Rs. 2 lakh. Employer contributions to NPS are covered under Section 80CCD(2).
ULIPs offer a combination of insurance and investment. Investors can allocate funds into debt, equity, or a mix, based on their risk appetite.
The premium paid for ULIP qualifies for a tax deduction of up to Rs. 1.5 lakh under Section 80C. The maturity proceeds are tax-free under Section 10(10D) of the Income Tax Act.
PPF is a popular tax-saving investment with exempt-exempt-exempt (EEE) status, meaning that the investment, interest, and maturity proceeds are all tax-free.
Investments up to Rs. 1.5 lakh qualify for deduction under Section 80C. PPF accounts can be opened at banks or post offices and can be transferred between institutions. The account has a lock-in tenure of 15 years.
SSY, introduced under the “Beti Bachao, Beti Padhao” campaign, aims at securing a girl child’s future. The minimum investment is Rs. 250 per year, and the account matures in 21 years or at the girl’s marriage, whichever is earlier.
Deposits up to Rs. 1.5 lakh are deductible under Section 80C. The interest earned is tax-free under Section 10(11A).
NSC is a low-risk investment designed for middle-income investors. It offers a guaranteed return of 6.8% annually and qualifies for tax deduction up to Rs. 1.5 lakh under Section 80C.
Interest earned is reinvested and also qualifies for tax benefits.
SCSS is exclusively for senior citizens and offers one of the highest interest rates among government-backed schemes. The minimum investment is Rs. 1,000, and the lock-in period is five years (extendable for three more years).
Investments up to Rs. 1.5 lakh are deductible under Section 80C. However, interest earned is taxable if it exceeds Rs. 50,000 in a financial year.
Tax-saving fixed deposits have a mandatory five-year lock-in period and offer interest rates ranging from 5.5% to 7.75%.
Investments in tax-saving FDs qualify for a deduction of up to Rs. 1.5 lakh under Section 80C, though the interest earned is taxable.
Apart from Section 80C, there are several other tax-saving provisions:
| Section | Benefit |
| 80TTA | Interest earned from Savings Account Deposits |
| 80E | Interest paid toward Education Loan repayment |
| 80D | Premium paid for Health Insurance |
| 24(b) | Interest paid on Home Loan |
| 10(10D) | Maturity payouts from Life Insurance Plans |
| 10(13A) | Exemption on House Rent paid (if included in salary structure) |
| 80GG | Deduction for House Rent paid (if not part of salary structure) |
| 80G | Donations to Charitable Institutions |
| 80GGA | Donations for Scientific Research and Rural Development |
By making strategic tax-saving investments, taxpayers can reduce their taxable income while growing their wealth. Utilize the Tax Planning Optimizer by Tax2win to maximize your tax savings before the financial year ends!
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