Tax Savings Schemes: Best Tax Saving Solutions In India
Every taxpayer in India is constantly on the lookout for the best schemes that can help them save taxes. As a result, several schemes are available on the market that can legitimately reduce taxpayers’ tax liability. These plans are commonly referred to as tax-saving plans. The National Savings Scheme, Senior Citizens Savings Schemes, National Pension Scheme, term deposits with post offices, Equity Linked Savings Schemes, Public Provident Fund, and others are the most popular.
Investments/contributions made in these schemes are tax deductible under certain provisions of the Income Tax Act. The main draw for investors interested in these schemes is the tax break. Let’s take a look at some of the most popular tax saving schemes in the country right now that can help you legally save a portion of your tax payments.
The Following Are Some Examples of Tax-Saving Schemes in Which You Might Be Interested:
PPF, or public provident fund, is one of the most popular long-term saving-cumulative-investment options. It is also a popular tax-saving scheme in India. PPF was created in 1968 to encourage small savings. PPF is popular because it provides attractive returns and tax advantages.
In a fiscal year, you must maintain a minimum deposit of INR 500. A deposit of up to INR 1,50,000 is permitted. Any amount greater than INR 1,50,000 is not eligible for interest or tax benefits. PPF returns are determined by the rate of interest, which is set by the Government of India every quarter. The current interest rate is 8% per year (with effect from October 2018).
The interest is calculated on the minimum balance in the PPF account between the 5th and last day of the month. Every year on March 31st, the interest is paid out. In terms of tax benefits, PPF interest and principal are fully exempt from income tax under Section 80C of the Income Tax Act of 1961.
Another well-known tax-saving scheme is the Equity Linked Saving Scheme. The investment amount in this scheme is invested in equity. One can begin investing in ELSS with as little as INR 500. There is no maximum amount that can be invested. There are two types of ELSS available. A dividend ELSS will either pay a dividend or offer the option to reinvest the dividend in equity. A growth ELSS can assist you in increasing your wealth. The average annual return on ELSS is between 15% and 18%.
Furthermore, ELSS is the only pure equity investment, making it an excellent tax-saving strategy. Section 80C of the Income Tax Act of 1961 allows for deductions of up to INR 1.5 lakh in a fiscal year. Long-term capital gains over INR 1 lakh are taxed at 10% if you invest in ELSS.
The National Pension Scheme, which is regulated by the Pension Fund Regulatory and Development Authority, is another popular tax-saving scheme. NPS is based on a contribution model, which requires the subscriber to make regular contributions to the retirement account. This contribution can be made by the employer in the case of salaried employees.
Pension funds invest the investment corpus in equity, corporate bonds, government bonds, and other alternative assets. NPS provides numerous tax-saving options. Investments of up to 10% of a salaried employee’s salary are exempt from taxable income under Section 80 CCD (1) of the IT Act, subject to a maximum of INR 1.5 lakhs.
Furthermore, INR 50,000 is deductible from taxable income over and above INR 1.5 lakh under Section 80CCD (IB). Furthermore, employer contributions of up to 10% of salary are deductible under Section 80CCD (2) of the IT Act. Tier II accounts, which are voluntary savings accounts, are also available through the NPS. This account, however, does not provide any tax-saving options.
The Senior Citizen Savings Scheme is a great tax saving scheme for senior citizens who want to save money on their taxes. The subscriber must be at least 60 years old. Under SCSS, you can also open joint accounts. The primary depositor’s age must meet the applicable eligibility criteria. The age of the second applicant is unrestricted if the secondary applicant is the primary subscriber’s spouse.
A minimum deposit of INR 1000 is required for a lump sum deposit. An individual, however, cannot deposit more than INR 15 lakhs in the account. The investment limit applies to all accounts in the case of a joint account. Deposits are accepted in multiples of INR 1000. SCSS investments are tax deductible up to INR 1.5 lakh per year under Section 80C of the Income Tax Act. It is important to note that any interest earned on SCSS investments is fully taxable in the investor’s hands.
Sections 80 C to 80 U of The Income Tax Act of 1961 Are the Various Sections that Provide for Tax Deductions. the Following Are the Key Sections:
Individuals and HUFs can claim tax deductions of up to INR 1.5 lakh for contributions to PPF, NSC, LIC premium payments, fixed deposits with banks, and so on.
Section 80CCD: Individuals can claim tax deductions of up to INR 1.5 lakh for contributions made by themselves or employers to a government-approved pension fund.
Individuals and HUFs can claim tax deductions for paying premiums for medical insurance policies under Section 80D. This section allows for a tax deduction of INR 25,000 for individuals or HUFs and INR 30,000 for senior citizens.
Section 80TTA: This section allows you to claim a tax deduction for interest earned on a savings account. At the moment, the deduction is limited to INR 10,000.