Tax Savings Schemes: Saving tax is one of the top interests of taxpayers around the world as a large portion of an individual’s earnings is spent on clearing taxes and duties. Investing in tax-saving schemes and plans to save more taxes is the ultimate goal for such people, who are looking for new ways to save their money. In order to do this, many factors have to be taken into consideration such as the amount of money that can be saved, the period of time to do it, the reason for saving the said money and other such things. There are many schemes that you can choose from.
For example, under the Income Tax Act, 1961, an investor is given the privilege to save tax on his or her investments. In addition, under Section 80C of this Act, a taxpayer can save a lot of money in a financial year.
Section 80C of the Income Tax Act
The 80C section of the Income Tax Act is one of the most popular tax saving options for individuals and HUFs in India. In this section, you’ll find plenty of investment and expense options that you can take advantage of. Under this section, you can save up to Rs 1.5 lakh in one financial year.
Here are some investment options that can help a taxpayer save money over a 5-year lock-in period:
Unit-linked insurance plans or ULIPs
A Unit Linked Insurance Plan consists of a mix of both insurance coverage and investments in bonds or stocks and is one of the most popular options for people looking to save tax. Under this plan, the beneficiary is required to pay a certain premium to the ULIP each month. Some of this money is used for insurance coverage, while the rest goes to investments in stocks, bonds, etc. Under Section 80C of the Income Tax Act, ULIP premiums are eligible for a tax deduction of up to Rs 1.5 lakh in any financial year. Under another heading, the amount you receive through your ULIP at maturity is exempt from tax deduction.
Tax-saving fixed deposits are like regular FDs, but they have a 5 year lock-in period. You can take a maximum deduction of up to Rs 1.5 lakh for investment in tax saving FDs. Every resident is eligible to invest in tax-saving FDs. There is, however, a lock-in period of 5 years. Also, the interest earned on such investments is taxable.
Employees Provision Fund
Employees Provident Fund is a government-sponsored tax savings scheme where all employees are registered with the Employees Provident FInd Organization as soon as they enter employment. The entire PF balance (including interest) is tax-free if withdrawn after five years of continuous service. Currently, the EPFO offers an interest rate of 8.50 percent per annum.
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