We spend most of our life in earning money. To make sure that our earned money remains safe, we must do extensive research on tax-saving policies. At first, we must know what income tax is and what are the different tax saving investment plans that can save our taxes.
The annual income of a person is subjected to taxes. The government collects taxes from the citizen. There is no specific amount of tax that one has to pay; it depends on an individual’s yearly income. But with acute knowledge, one can save a huge amount of payable tax. It needs proper planning at different stages of one’s life.
Importance of Tax Saving
There are various tax saving investment plans so that we can get the maximum benefit in taxes. If we invest our money properly in those plans then some parts of our annual income are not calculated in our payable taxes amount. Thus the money we have to pay as our tax decreases.
People generally calculate their taxes at the end of a financial year but tax planning should not be done in a hurry. We need to carefully plan each small and larger investment to get the maximum benefit. Tax saving is not only about reducing one’s tax liabilities but it also decides our financial goals and growth. So, it is very important to give a good thought about the tax-saving investment plans.
There are different taxes saving plans under Section 80C of the Income Tax Act, which can provide us with many benefits. Few are mentioned below:
- Public Provident Fund (PPF)
It is a type of recurring plan that lasts up to 15 years. Annually a specific amount of money needs to be invested to keep the account active. The minimum amount of money is 500 per annum and the maximum is 70,000 per annum. Only the mentioned range of contribution gets the tax benefits. It gives a return of 8.0% per annum at present. There is no regular interest and withdraws can be made only after the 7th financial year.
- Post Office Time Deposits (POTD)
They are small savings fixed deposits. The investor can invest their money for 1 to 5 years but only the 5-year investment plan gets the tax benefits. It gets a return of 7.5% per annum and the minimum amount is 200 with no upper limits. One can withdraw the cash after 6 months of deposit.
- Life Insurance Schemes
We can invest in some beneficial life insurance policies to save taxes. It secures our family if any misfortune takes place and also saves our taxes. The amount we pay for such insurance policies is waved off while calculating our payable tax amount. So investing in the best policies is very beneficial.
- ELSS Mutual Fund
ELSS is an extremely popular investment option as it offers great returns and also helps to save tax. This investment is qualified for tax exclusion under section 80C of the Indian Income Tax Act so you earn profits and save tax as well.
Apart from these plans, we can go for Fixed Deposit plans, National Savings Certificate plan, Senior Citizen Saving schemes, and Mutual Investment plans because they are very helpful in saving our taxes.
Thus we should invest our earned money in the right places so that we can enjoy the full benefit of our hard work.