Maximise Tax Savings: Explore Investment Options Before April 2023

Maximise Tax Savings: Explore Investment Options Before April 2023

As the financial year draws to a close, it's time to start thinking about tax-saving investments. While most people are aware of popular options like PPF, ELSS, and life insurance, there are several lesser-known investment options that can help you save more tax. In this blog, we will explore 15 such options and how they can benefit you.

Investment Options Under Section 80C

1. National Savings Certificate (NSC)

NSC is a government-backed scheme that offers a fixed rate of interest and a tax benefit under Section 80C of the Income Tax Act. The investment in NSC has a lock-in period of 5 years.

2. Public Provident Fund (PPF)

PPF is a popular investment option that offers tax benefits under Section 80C of the Income Tax Act. The investment in PPF has a lock-in period of 15 years and offers a fixed rate of interest.

3. Equity-Linked Saving Scheme (ELSS)

ELSS is a tax-saving mutual fund scheme that invests primarily in equity and equity-related instruments. ELSS has a lock-in period of 3 years and offers potentially higher returns than traditional tax-saving options.

4. Unit-Linked Insurance Plan (ULIP)

ULIP is a combination of insurance and investment that offers tax benefits under Section 80C of the Income Tax Act. ULIP has a lock-in period of 5 years and offers flexibility in investment options.

5. Sukanya Samriddhi Yojana (SSY)

SSY is a government-backed scheme that offers tax benefits under Section 80C of the Income Tax Act. The scheme is designed to provide for the education and marriage expenses of a girl child. The scheme has a lock-in period of 21 years, but withdrawals for education up to 50% of the account balance are allowed after the account holder turns 18 or passes tenth grade.

Other Investment Options

6. Senior Citizen Savings Scheme (SCSS)

SCSS is a government-backed scheme that offers a fixed rate of interest and tax benefits under Section 80C of the Income Tax Act. The scheme is available to senior citizens aged 60 years and above and has a lock-in period of 5 years.

7. Tax-Saving Fixed Deposits (FD)

Tax-saving FDs offer tax benefits under Section 80C of the Income Tax Act and have a lock-in period of 5 years. The interest earned on tax-saving FDs is taxable.

8. Infrastructure Bonds

Infrastructure bonds are issued by government-approved companies and offer tax benefits under Section 80C of the Income Tax Act. The investment in infrastructure bonds has a lock-in period of 5 years.

9. Real Estate Investment Trusts (REITs)

REITs are a type of investment fund that invests in income-generating real estate properties. REITs offer tax benefits under Section 80C of the Income Tax Act and can potentially offer higher returns than traditional tax-saving options.

10. Exchange Traded Funds (ETFs)

ETFs are a type of investment fund that tracks the performance of a particular index or asset class. ETFs offer tax benefits under Section 80C of the Income Tax Act and can be an alternative to traditional tax-saving options like PPF and NSC.

11. Capital Gain Bonds

Capital Gain Bonds are issued by the National Highways Authority of India (NHAI) and the Rural Electrification Corporation (REC) and offer tax benefits

12. Employee Provident Fund (EPF)

EPF is a government-backed retirement savings scheme that offers tax benefits under Section 80C of the Income Tax Act. Both the employer and the employee contribute to the scheme, and the investment has a lock-in period until retirement.

13. National Pension Scheme (NPS)

NPS is a voluntary pension scheme that offers tax benefits under Section 80C of the Income Tax Act. The investment in NPS has a lock-in period until retirement and offers flexibility in investment options.

14. Health Insurance

Premiums paid towards health insurance policies are eligible for tax benefits under Section 80D of the Income Tax Act. The maximum deduction available under this section is Rs. 25,000 for self, spouse, and dependent children, and an additional Rs. 25,000 for parents.

15. Education Loan

Interest paid towards education loans is eligible for tax benefits under Section 80E of the Income Tax Act. The deduction is available for a maximum of 8 years and is applicable only for loans taken for higher education.

Also Read - Top 10 Highest Dividend Paying Stocks in India for 2023

How to Choose the Right Investment Option?

To make it easier for you to compare and choose among the various tax-saving investment options available before March 31, 2023, here is a table that summarizes their key features:
 

Also Read - Navigating Market Fluctuations

Conclusion

As you can see, there are several investment options available to save tax before March 31, 2023. 

While traditional options like PPF and ELSS are popular, exploring lesser-known options like infrastructure bonds and REITs can potentially offer higher returns. 

It is important to assess your risk appetite and investment goals before making any investment decisions. With careful planning and informed choices, you can maximize your tax savings and secure your financial future.