A Sneak Peek into 5 Smart Tax Saving Instruments

Choosing a tax saving instrument that’s optimal for you can be a little perplexing. The reason is you need to analyze everything from the returns, flexibility, liquidity to the cost of the investment. Simultaneously, you need to ensure that the investment meets your financial goals. To help, we decided to list five smart ways you can save more tax. If you are don’t have the time for tax planning or find it confusing, you can seek the assistance of a professional firm offering taxation Services India.

1. (Equity Linked Savings Scheme) ELSS Funds

ELSS funds are one of the most transparent and highly liquid tax saving instruments with a 17.8 percent average return record in the past three years. Although these equity schemes present a market risk equal to other diversified funds, they offer better returns than 3- to 5-year PPF investments.

2. (Unit Linked Insurance Plan) ULIP

Unit Linked Insurance Plan or ULIPs come in the form of stocks, bonds, and mutual funds. The tax instrument offers certain risk cover to the policyholder and greater flexibility over direct mutual funds. Another advantage is that you can use these investments before three years, and either as equity or debt, and vice-e-versa. ULIP investments cost less than direct mutual funds and are suitable for people across all life stages and all types of investors.

3. National Pension System (NPS)

The NPS or National Pension System now offers an additional of Rs 50,000 of tax deductions, which makes it an attractive tax saving investment for many people. NPS entails two types of accounts: Tier I and Tier II. Tier is like a pension product, whereas Tier II operates like a savings account, which means you can withdraw money from it when you want. Once you choose a pension plan, however, you cannot switch to another before a year.

4. Senior Citizens’ Saving Scheme (SCSS)

The Senior Citizens’ Scheme is an ideal tax saving instrument for senior citizens. Although it has an overall investment limit of Rs. 15 lakh, it offers one of the best interest rates, at 9.3 percent, in the list of post office schemes. The maturity period is 5 years, which you can extend by 3 years.

5. BANK FDS AND NSCs

If you are a senior citizen who has already used the 15-lakh investment limit in the Senior Citizens’ Saving Scheme, you can further use the option of FDs (Fixed Deposits) or National Savings Certificate. NSCs offer a rate of interest in the range of 8.5% - 8.8%. The interest rates of fixed deposits depend on the lock-in-period. If you don’t have the time for assessing other tax investment schemes, and the deadline is near, invest in FDs and NSCs.

There’s More!

There are various other investments such as PPF, VPF, and pension plans, which you can use to gain good returns and save a significant amount of tax. Speaking to a professional taxation service provider in India can help learn more about your options. In addition, such providers often offer other services such as wealth management, which you can use to multiply your wealth and protect your investments.