Income Tax Saving A plan should not be made in a hurry for saving in income tax, it can be harmful. You should start tax planning from the beginning of the financial year. Today we will tell you such tax saving options which give attractive returns.
Tax Planning | Tax Saving Otions: For most of us earning people who pay income tax, for them the new year starts from 1st April. Most of the rules and regulations proposed in the budget become effective from April 1, and experts believe that with the beginning of the new financial year, those people who come under the purview of taxable income should start working on tax planning.
There are many benefits of income tax planning from the month of April. First, you can invest a small amount over 12 months instead of a lump sum. Second, you also have enough time to make wise decisions. Third, you can choose the best investment options considering your short term, medium term and long term goals.
This will not only help you in tax saving, you will also be able to easily build a corpus for your goals. Today we will discuss some similar Tax Saving Options.
Save money for your little girl’s higher education and get tax saving benefits
Sukanya Samriddhi Yojana (SSY): The Sukanya Samriddhi Yojana was started by the central government to collect money for the higher education of girls and their marriage. According to Jitendra Solanki, SEBI Registered Investment Advisor, if you have a daughter up to 10 years of age, then you can open an account of Sukanya Samriddhi Yojana in her name.
The highest interest is being paid on this scheme in the Small Savings Scheme. Its interest rate for April to June 2022 has been fixed at 7.6 percent. Its interest rates are decided by the government every quarter. You can get the benefit of deduction under section 80C of the Income Tax Act by depositing up to Rs 1,50,000 in this account annually.
Public Provident Fund (PPF)
Dhirendra Kumar, CEO, Value Research, says that if you do not want to take risk associated with the stock market, then Public Provident Fund (PPF) can prove to be a good option from the point of view of long-term investment.
You can also open this account in the name of your children. Its maturity period is 15 years. The best part is that you get the benefit of Exempt-Exempt-Exempt (EEE) on this. Meaning, the amount invested, the interest earned on it and the maturity amount is completely tax-free.
Its interest rates are also fixed by the government every quarter. Its interest rate has been fixed at 7.1 percent per annum for the quarter April-June 2022, which adds up annually.
As a long-term investment, it can prove to be helpful in raising funds for children’s higher education or your retirement, Also it will save income tax. You can invest in it every month. You will get the benefit of deduction under section 80C on investment up to Rs 1.5 lakh per annum
Equity Linked Savings Scheme | Equity Linked Savings Scheme
Equity Linked Savings Scheme ie ELSS are the schemes of Mutual Funds. Under Section 80C of the Income Tax Act, you can get the benefit of deduction of income tax on investments up to Rs 1.5 lakh per annum. It has a lock-in period of three years. In fact, ELSS are diversified equity schemes.
According to Kumar, it is a great investment option for those who can take the risk associated with the stock market with a long term perspective. The best performing funds in the ELSS category have given returns of 39 per cent in three years and 25.23 per cent in five years.
You can also invest in these funds through Systematic Investment Plan (SIP) every month. Investing through SIP averages out the cost of mutual fund units and gives you better returns. Let’s take a look at some of the best ELSS performances.
National Pension System | NPS
National Pension System is also helpful in your tax saving. Kumar says that if a person wants to save for his retirement then he can opt for NPS. Under Section 80CCD(1) of the Income Tax Act,
it provides the benefit of deduction of income tax on investments up to Rs 1.5 lakh annually. Apart from this, investors also get the benefit of additional deduction of Rs 50,000 under Section 80CCD (1B) of the Income Tax Act.
