How to Save Tax?

Several types of taxes in India are levied on different commodities like income, wealth, and property. Income taxes are imposed on an individual’s annual income, while corporate taxes are levied on corporations by the central government. Wealth taxes, on the other hand, are taxes imposed on the total asset value owned by either individuals or companies. The main purpose of these taxes is to generate revenue that aids the smooth functioning of the country and helps the government promote economic development.

With taxes being levied on most of the things in our lives, it makes sense that individuals would look for ways to save as much tax as they legally can. Here, we will go through some of those ways to help save taxes in India.

• Consider Section 80C when choosing a way to save taxes in India.
• Keep in mind the interest rate being offered by each scheme.
• Also, keep in mind the lock-in period or tenure of such schemes and invest according to your needs.

Of all these sections, Section 80C is the most common and popular tax-saving option available to both individuals and HUFs. Section 80C offers several deductions and exemptions on investments and insurance premiums.

Here’s a look at some of the main saving schemes under section 80C that can help you save tax in India:

1. Equity-Linked Savings Scheme

• The Equity-Linked Savings Scheme (ELSS) is a mutual fund having a lock-in period of 3 years.
• The scheme is the only mutual fund where investors can claim a tax deduction under Section 80C of the IT Act.
• It offers higher returns compared to other tax-saving schemes.
• It also offers the option to invest through lump sum or via SIP.
• ELSS investments are equity-oriented and come with certain risks.

2. Public Provident Fund or PPF

• PPF is a long-term savings scheme backed by the government.
• It has a tenure of 15 years and can be applied for through most banks and post offices.
• PPF’s rates change every quarter, and it enjoys the ‘exempt-exempt-exempt’ (EEE) status.
• A PPF account can easily be opened with a minimum of Rs. 500 and a maximum investment in a financial year of Rs. 1.5 lakh.

3. National Savings Certificate

• NSC has a fixed interest rate of 7.7% per annum and a tenure of 5 years.
• Under section 80C, the invested amount qualifies for tax deduction up to Rs. 1.5 lakh every year.

4. Tax-saver FDs

• Investors can avail of a maximum tax deduction of Rs 1.5 lakh under a 5-year tax-saver FDs.
• This investment scheme comes with a fixed interest rate, usually between 7 and 8%.
• The interest earned is taxable as per the investor’s tax bracket. If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 7.30% p.a.

5. Senior Citizens Savings Scheme

• SCSS is a long-term, government-backed option with a tenure of 5 years.
• As its name suggests, SCSS can be availed of by individuals above 60 years of age.
• The SCSS scheme has an interest rate of 8.2%, and the interest thus earned is taxable.
• Individuals can apply for a maximum tax deduction of up to Rs 1.5 lakh.

6. Sukanya Samriddhi Yojana

• Parents with a girl child below 10 can apply for this scheme.
• This scheme also allows for a maximum tax deduction of Rs. 1.5 lakhs.
• The tenure for the account stands at 21 years from the day of opening or upon the marriage of the girl after attaining the age of 18.
• The current interest rate of the scheme is at 8.2%.

7. Employees’ Provident Fund or EPF

• This is a retirement benefit scheme for salaried employees.
• Here, employers deduct 12% from an employee’s basic salary and Dearness Allowance (DA).
• The deducted amount is deposited in a PF recognised by the government.

Many schemes by the government can help you save taxes in India very efficiently, but it is important to weigh all the pros and cons associated with them to ensure that you are getting a good deal. Keep in mind the interest rate being offered by each of these schemes and choose the ones that can help provide good returns and are eligible for tax deductions.