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Tax Saving Schemes in 2023
How to save taxes, or rather, how to plan your investments, is a question that we all have. While tax planning is important, so are tax-saving strategies. With the best tax-saving schemes in India, you can save money while also earning money. The beginning of the fiscal year is the best time to plan for tax-saving investments. This ensures that you do not pay more taxes and save taxes in India, as well as year-long returns on tax-saving investments.
Tax-saving schemes mutual funds, also known as Equity Linked Savings Schemes (ELSS), can help you save income tax under Section 80C of the Income Tax Act. Every fiscal year, you can invest up to Rs 1.5 lakh in ELSS and claim tax deductions on your investments. Do you want to know more? You should first become acquainted with ELSSs before proceeding.
When considering how to save tax in India, keep in mind that your goal should be more than just tax savings. The goal must be to invest in the best-suited investment option while also saving money on taxes. In this article, we have listed the best tax-saving schemes options for 2023.
Unit Linked Insurance Plan (ULIP):
One of the most important investment plans in India is the ULIP Life Insurance Plan. It ensures that one’s family is financially secure in the event of death. The taxpayer can benefit from the income tax act by purchasing a life insurance policy.
The premium paid towards the purchase of a life insurance policy is deductible up to Rs. 1.5 lakh under section 80C of the Income Tax Act of 1961. Furthermore, income from the policy’s maturity is tax-free under Section 10(10D).
ELSS Mutual Funds:
Equity Linked Savings Schemes are mutual funds that invest a significant portion of their portfolio in equity. Furthermore, the fund has a three-year mandatory lock-in period, which is the shortest of any investment product.
Investment in ELSS funds is tax-deductible up to Rs. 1.5 lakh under section 80C of the Income Tax Act. The deduction is available for both lump sum investments and investments made through a systematic investment plan (SIP). Because ELSS funds invest heavily in equity, there is always some risk.
ELSS funds provide both capital appreciation and tax savings. As a result, it is one of the most popular tax-saving schemes among investors.
Public Provident Fund (PPF):
The Public Provident Fund has always been one of the most popular tax-saving schemes among taxpayers. One of the primary reasons for this popularity is that PPFs are tax-exempt-exempt-exempt. PPF accounts can be opened at a bank or a post office.
PPF accounts have a 15-year lock-in period and provide investors with the following options at the end of the maturity period:
1. Withdrawal of funds from an account
2. Continue for an additional 5 years
Sukanya Samridhi Yojana (SSY):
One of the most important tax-saving schemes is the Sukanya Samriddhi Yojana. The government of India launched it in 2015 as part of the Beti Bachao Beti Padhao campaign. It had a significant impact on the general public. The scheme allows for a fixed-income investment in which the taxpayer can make regular deposits while earning interest. Sukanya Samriddhi Yojana investments are also deductible under Section 80C of the Income Tax Act.
The rate of interest on the scheme is determined quarterly by the government of India and is payable upon maturity. The scheme has a 21-year lock-in period and will mature after that time period expires.
The following are the eligibility requirements for opening a Sukanya Samriddhi account:
1. This scheme is only available to female children.
2. The girl child cannot be older than ten years old. A one-year grace period is provided, allowing the parent to invest with 1 year of the girl child being 10 years old.
3. The investor must provide proof of the daughter’s age.
National Savings Certificate:
The National Savings Certificate (NSC) is a tax-free investment designed to encourage small or medium-sized savings and is backed by the government.
The NSC scheme is promoted by the Indian government and is available at all Post Offices. The risk is considered to be very low because the scheme is backed by the Indian government.
1. A guaranteed return of 7% per year.
2. Section 80C allows you to claim a tax deduction of up to Rs. 1.5 lakh.
Tax-savings fixed deposit:
Fixed deposits are regarded as one of the most secure tax-saving strategies. In terms of risk and return, it is less risky than equity investments. Interest rates are set by banks and are determined by a variety of factors.
1. Investments in tax-saving fixed deposits are deductible under Section 80C when calculating taxable income.
2. 5-year minimum lock-in period
Senior Citizen Savings Scheme:
Senior Citizens Savings Scheme (SCSS) is a post office savings scheme for senior citizens that provides investors with security and regular income. It is also a tax-saving strategy. It is appropriate for retired investors seeking a low-risk investment option. Section 80C allows for tax exemption on SCSS investments.
Repayment of an education loan:
Section 80E of the Income Tax Act provides a tax benefit on loan repayment in the form of a tax deduction. The deduction can be claimed by either the parent or the child, depending on who pays the EMI for the education loan. The deduction under section 80C is available only if the loan is obtained from a financial institution rather than a family member. You can claim the tax deduction beginning with the year in which the repayment begins.
Rent paid and no HRA received:
In general, you receive HRA as part of your salary and treat it as a significant tax-saving scheme when filing your income tax returns. Section 80GG was introduced to provide taxpayers with benefits even when HRA is not received. According to this section, a taxpayer can claim a deduction for rent paid even if they do not receive HRA.
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