4 Best Tax Saving Investment Under Section 80C

Best Tax Saving Investment

Many of us keep thing about the Tax Saving Investment that it can save us from paying extra tax, here I will tell you the Best Tax Saving Investments by comparing them with important parameters but before that let’s have a brief idea of Income Tax.

What is Income Tax?

Suppose you are earing some ‘X’ amount of money out of which you have to give some amount to the government which will be in turn used for public services.

We do not know how and where the government is using this money, but the Income Tax Department of Indian returns our money if we save more money and e-filing income tax.

So I will let you know the Best Tax Saving Investments where you can save more money

Best Income Tax Saving Investment Schemes

Let’s find out the Best Tax Saving Investment Schemes for salaried employees by comparing some popular investments such as NPS (National Saving Scheme), Fixed Deposit, PPF(Public Provident Fund), EFP( Employee Provident Fund) & Mutual Funds & Also ELSS (Equity Linked Saving Scheme)
The comparisons are made on the four main parameters of investments as seen in the table.

Best Tax Saving Investment Schemes

Each Investments has its own advantages & disadvantages about which we will be covering here.

Tax Saving Investment # 1 – Fixed Deposit

This is a very simple investment instrument
Risk – The risk is less and can be opened in any bank or post office
Liquidity – High Liquidity as you can deposit the amount whenever you want and withdraw whenever you want
Taxation – Under Section 80C with Tax Rebate for FD with 5 years lock-in period, here the interest which we gain over the 5 years is taxable.
Returns – The returns are Low

Tax Saving Investment # 2 – Provident Fund

PPF generally are of 2 types
1. PPF(Public Provident Fund) – PPF can be opened by anyone in any banks
2. EPF(Employee Provident Fund) – EPF account is opened by an employer if you are a salaried employee, where the money is deposited from both employer & employee
Risk – The risk is less as it is a part of the government component.
Liquidity – Low liquidity as the investments are made for the long term. PPF are a lock-in for 15 years, partial withdrawal can be made only in some emergency cases such as Marriage, Medical, House Construction, etc. EPF cannot be withdrawn until we leave the job.
Taxation – Under Section 80C with Tax Rebate and here the Interest is not taxable under EEE when you withdraw the amount.
Returns – The returns are Moderate 8-9%, both PPF & EPF give you the same amount of returns.

Tax Saving Investment # 3 – NPS ( National Savings Scheme)

Risk – The risk is Moderate as we invest in Equity + Debt, 75% of the amount can be invested in Equity
Liquidity – Very Low Liquidity as the lock-in is till the retirement, you have an option for partial withdrawal in some emergency cases
Taxation – Under Section 80C with Tax Rebate, there will be an additional TAX Rebate for Rs 50000 additional Rebate on Employer Contribution. 60% of the investment can be withdrawn at 40% of the total amount will be invested in an annuity in the form of pension
Returns – The returns are High 8-13%

Tax Saving Investment # 4 – Mutual Funds & ELSS

Risk – The risk is Moderate as we invest in Equity + Debt, the risk is diversified and Max of 100% of the amount can be invested in Equity depending on your requirement
Liquidity – High Liquidity as you can Invest the amount whenever you want and withdraw whenever you want through the means of online
Taxation – There will be an ELSS [3yrs Lock-In] Under Section 80C with Tax Rebate, earlier there was no tax in returns but now Long term capital gains tax has been introduced on the overall returns if the investment period is more the 1 Year then 10% of capital gains tax is applicable
Returns – The returns are High one can expect returns of 8-14%

Each of these Investments can be used for a particular goal.

Now that we have compared all the Tax Saving Investments w.r.t parameters, I will let you know the right time for these investments with the examples in below table

Investment Table

Thus, to save your taxes all you need to have is proper planning. I hope these comparisons and example have given you an idea as to where to invest

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