Fixed deposits offered by multiple banks can be considered to be a tax-saving instrument, says Naval Goel.
Illustration: Dominic Xavier/Rediff.com
At the end of every financial year, it becomes very challenging for most of us to pay tax easily.
Most of the hustles are associated with the submission of several insurance documents, investment papers, and rent receipts as well. But if you are looking for ways to save tax and protect yourself from unnecessary financial stress then its very important to look for all the tax-saving instruments.
To make sure how much you can save on your tax, it is very important to understand different tax slabs.
Almost everyone is aware of the income tax laws and different slabs for different annual income groups.
So if you want to save on tax like many other people then you must invest in insurance, different investment options for the future. Below are a few options to save tax.
Insurance
Investing in insurance comes out with multiple benefits but one of the major benefits apart from the safety is that it helps in saving tax.
Let's discuss how it will help in saving tax:
Life insurance
Life insurance does not only provide coverage to the individual for the long term but also offers several tax benefits.
Under life insurance, a person has to pay a premium on a regular basis to keep his/her policy active which can provide the needful cover in the hour of need or in case of demise of the insured.
The premium that you pay to keep your life insurance policy active is liable to offer tax benefits under section 80C of the income tax act.
ULIPs
Unit Linked Insurance Plans are basically market-linked products.
Under the same, the insured gets the benefits of both insurance protection and investment as well.
The financial investment that you made under this plan is eligible for a tax deduction and let your money grow successfully.
Health insurance
We all know that the cost of medical treatments is rising on a daily basis and investing in a health insurance plan has become a necessity.
The main motto of the health insurance plan is to ensure that you have enough funds to deal with any medical emergency.
If you invest in health insurance then you can save taxes up to Rs 15,000 to Rs 20,000.
Investments
Investments are financial tools in which you invest today and reap huge benefits later.
Apart from this, investment also helps you to save on taxes. Some of the common investment options are:-
Mutual funds
Equity-linked savings schemes can be used to get tax benefits.
It comes with a lock-in period of 3 years. If you notice then the lock-in period of mutual funds is very less as compared to fixed deposits and PPFs.
One of the major benefits of mutual funds is that they offer huge returns.
Tax saving fixed deposit
Fixed deposits offered by multiple banks can be considered to be a tax-saving instrument.
A person can invest in the same for huge returns and can also save huge on taxes as well. It comes out with a lock-in period of 5 years.
Post office time deposit
Post Office Time Deposit is the same as a fixed deposit, the only difference is that under post time deposit there are no limits on how much a person can put in it.
The minimum investment should be of Rs 200. IT offers a compelling interest of 8% per annum.
It comes out with a lock-in period of 5 years and allows you to avail tax benefits under section 80C of Income Tax Act.
National Saving Certificates
A person can avail national savings certificate from the post office.
A person has to make a minimum investment of Rs 100.
It comes with a lock-in period of 5 and 10 years. The investment that you made in NSCs are liable for tax exemption.
Provident Fund
Provident funds are also popular by the name of pension funds. They are established with a long term goal.
The deposit that you made in the provident fund is eligible for the tax deduction under 80C of Income-tax.
There are several other ways through which you can easily save tax.
The foremost thing that you must keep an eye on is all the available instruments through which you can save more and more.
It is important to pay attention to each and every factor before finalising things.
A wrong investment can lead you to huge losses. So it is important to make sure that you are choosing the right instrument to save tax.
Naval Goel is CEO and founder of PolicyX.com.
