Income TaxInvestmentTax saving

Here are the best investment options to save tax this year

When considering options for saving tax for this financial year, it is important to segregate the tax payer between a salaried and non-salaried person. Let’s de-tangle the nitty-gritties of both.

Salaried Employee

Tax saving investments can not only help in saving tax, but also in achieving financial goals through judicious investments.

Against the earnings column come the basic salary along with various allowances and perquisites. One important aspect to note is a clarifying judgement by the supreme-court recently making all allowances besides the basic salary to be calculated for PF contribution. Some of the tax-saving options are as below:

  • Equity Linked Savings Scheme (ELSS)
  • Tax saving ELSS Mutual funds
  • PF and voluntary PF
  • Public provident Fund
  • LIC premiums
  • National Savings Certificates
  • Infrastructure bonds
  • Five Year Bank Deposits
  • Five Year Post office time deposits
  • Contribution to National Pension Scheme
  • NABARD rural bonds
  • ULIP
  • Home Loan – Repayment of Principal and Interest
  • Sukanya Samriddi account
  • Payment of Tuition fees

Also Read: Value Investing: The Butterfly Effect

Non Salaried Employee

  • HRA, deduction on housing loans
  • Senior Citizen Investments
  • Section 80D for medical expenses (limits increased for 2019-20)

Expenses or investment under these heads qualify for deduction under the Income Tax Act of the country.

Best Investment Options to Save Taxes

When the prime concern lies over tax-saving, ELSS fund makes for a good choice along with a lot other like the retirement-time returns providing NPS, pension schemes for the post retirement period, senior citizens’ saving scheme for the 60 ups, Sukanya Samriddhi for tax payers with a daughter below 10 years etc but the show-stealer in today’s investment scenario is ULIP as it is the perfect amalgamation of insurance and investment that comes with a number of added benefits.

ULIPs landed its feet in the savings scenario last year after the Budget introduced tax on long-term capital gains from stocks and equity funds. Distributors and insurance companies didn’t waste much time to point out that income from ULIPs is completely tax free under Sec 10(10d). Even before the tax on capital gains was announced, ULIPs had a distinct tax advantage over mutual funds. ULIP plans not only offer equity funds but also debt and liquid fund options to investors.

Also Read: Things to know before investing in ELSS

Let’s summarize with a quick glance through a comparison chart

SCHEME TAX FREE RETURNS TAX EXEMPTION ON INVESTMENT HIGH MARKET LINKED RETURNS LOCK IN PERIOD
ULIPs YES YES YES 5 YEARS
PPF YES YES NO 15 YEARS
ELSS NO YES YES 3 YEARS
NPS NO YES YES 60 YEARS-CURRENT AGE

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of Finaacle.com - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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