FD Tax

An Overview of 6 Popular Tax-Saving Options

5 mins read

The income tax act provides several tax-saving investments that allow you to reduce your tax outgo without causing stress. To grow your money, you need to make smarter and more effective investments for your future financial goals, such as your children’s education and retirement. Tax-saving best short-term investments plans play a crucial role in achieving financial success. 

Various investment schemes such as Mutual Funds FD etc are available on the market and offer tax exemptions and deductions. You can reduce your tax burden if you invest in the correct tax-saving schemes at the right time.

Listed below are the six best popular tax- saving options

Public Provident Fund 

There is no doubt that provident funds are considered to be the best way to save money on taxes under section 80C for investors looking for a less risky investment. A PPF investment has a 15-year lock-in period. In the PPF, the Ministry of Finance decides the interest rate, which is currently set at 7.9% per year. PPF is best known for providing tax benefits at all levels in India, which is one of the best features of the plan. PPF offers tax benefits over an extended time, which is suitable for all citizens of India due to its long-term investment horizon.

Equity Linked Saving Scheme 

ELSS offers tax benefits under section 80C of the tax code as a diversified equity mutual fund. ELSS funds are mainly invested in the stock market. In the case of ELSS, there is a three-year lock-in period. Moreover, when you select the SIP option, you will be given a different maturity date for each instalment. ELSS are linked to the market, and it is one of the best short-term investments schemes that give comparatively higher returns. ELSS is, therefore, better and more beneficial investment in tax savings.

Unit Linked Insurance Plans 

Under section 80C of the Act, ULIPs are considered the best short-term investment schemes. Unit Linked Insurance Plans also feature market-linked and life cover returns and are subject to a five-year lock-in period. There are several ways that ULIPs can provide life coverage, while other parts of the premium are invested directly into the funds of your choice. Investment in ULIPs is available in various options, and the market determines the return on investment.

Senior Citizen Savings scheme

Senior Citizen Savings Scheme (SCSS) provides a steady and secure source of income for retirees over the age of 60 and offers relatively substantial returns. It is important to note, however, that interest received will be subject to taxation under the applicable slab of the concerned taxpayer.

National Savings Certificate 

There are several options for small investors that are  best short-term investments. Still, National Savings Certificates (NSC) are one of the best because they act like a fixed income investment, allowing investors to save on taxes. The benefit of this tax option is that it comes with low risk and offers a guarantee of returns. NSC’s maturity period ranges from five to ten years. The maximum deduction is Rs 1.5 lakh, and the interest rate is 7.9 percent compounded annually.

Fixed Deposit Schemes (FD)

There is no doubt that fixed deposits are one of the best short-term investments as well as long-term investment instruments that banks and non-banking financial companies offer to their customers in order to save money. You can choose fixed deposit tenure ranging from a minimum of 7 to 14 days up to ten years. FDs are sometimes referred to as term deposits. 

You can plan on opening a fixed deposit account at a specific interest rate, and you are guaranteed to keep the same interest rate regardless of changes that are occurring due to changes in the market. You can choose whether or not you wish to receive interest every month or at maturity, depending on your preference. However, you cannot withdraw the money before the account’s maturity. 

 

Mohsin Waqar

Mohsin Waqar is a blogger, who has worked for various websites and has a keen interest in business, finance, and crypto news.

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