Tax saving is a permissible act in India. It is possible to save a reasonable amount of direct tax through different tax saving options. A good financial plan is something that should include an excellent tax savings investment. It is a plan that not only saves money but a smart way to grow your wealth.
There is more to tax investment than just securing the money. An investor needs to think about the maturity, risk, and liquidity of the investment options. The best investment plan is something that offers tax exemptions and tax earnings. Before considering the right tax saving option, you need to know about the tax deductions available under Section 80C.
With that said, let us look at the smart tax savings options that are legal under the income tax act Section 80C.
The definition of Section 80C :
Section 80C of the Income Tax Act is the most used tax-saving option among taxpayers. It allows taxpayers to reduce their taxable income and avail tax exemptions. Through section 80C, a person can claim up to a maximum deduction of Rs. 1.5 Lakh from their gross total income.
What is a term plan and why is it essential?
A life insurance plan is so far the best way to enjoy the tax benefits. Both tax savings and earnings are possible through various policies. There are tons of insurance policies in the market. However, the two major categories in the insurance plans are permanent plans and term plans. Both the insurance plans have their pros and cons. Ultimately, both the plans offer tax-saving benefits and long-term tax protection.
A term plan is a more secure, consistent, and less risky policy available in the market. Through the term policy, the insurer can provide financial protection to the family. The family can receive benefits after the demise of the insurer. Also, it is one of the most affordable plans that offer long-term protection.
In short, a term plan can prove to be a vital entity for your tax-saving investment goals. It is a plan that is eligible for high tax exemptions. The insurer can get up to INR 1.5 lakh tax exemption when choosing a reliable life insurance policy.
The only difference in the permanent insurance plan is that the cash-out option is available only after the maturity period. However, both these plans are similar and provide plenty of freedom for the insured to experience tax benefits.
The investment policies eligible for tax exemptions under Section 80C
You can enjoy the tax exemptions for paid insurance premiums. Whether the insurance premium is paid for children, wife, or any close relative, these payments are eligible for tax deductions under Section 80C. The tax exemption is beneficial if you choose an insurance policy with a tenure of 5-years and above.
All your payments for fixed deposit plans are eligible for tax exemptions under Section 80C. However, some of the restrictions in this policy are that premature withdrawals are not allowed. Also, the returns from the fixed deposits during the saving period are taxable income.
Public Provident Funds
All the payments for PPF and its returns from the policy over 15 years are eligible for tax exemptions. It is one of the best scheme as there are possibilities of earning as well as securing money. both money securing and earning possibilities.
Senior Citizen Saving Scheme
Even the senior citizens can save their money from tax through investing in SCSS policy. The interests are taxable, but the accumulated interests are eligible for tax exemptions under Section 80C.
National Pension Scheme
You can now save the hard-earned salary from tax payments by investing in the NPS scheme. It is a smart policy for all working individuals who can secure their money from the age of 18 to 60 years. It is not just a scheme to make your retirement life secure, but a pension scheme eligible for tax reduction as well.
All these investment policies are the best plans eligible for tax deductions under Section 80C. By investing in one of these plans, it is possible to save money and avail the benefits of tax saving.
Tax-saving investments give benefits in deductions under Section 80C . Review the above investment policies to make an informed decision. It can save your money and help you grow wealth in the long run.