Income Tax Saving Investment Schemes

There are various types of investment options available for taxpayers, but it can be confusing as to which scheme one should invest in. Let’s get to know some of the Income Tax Savings scheme in this article.

When a new financial year begins, it is also the time for every taxpayer to declare investments to save maximum taxes. Saving taxes is a great way to accumulate money, which can be used to fund short or long-term life goals. However, the most confusing question in taxpayers' minds is what kind of Income Tax Saver schemes can help to save taxes. There are various schemes that you can invest, and you can make a suitable choice depending on your financial needs:

Here are some of the Income Tax Saving Schemes:

1. 5-year Fixed Deposit Scheme: This type of Fixed Deposit is one of the best Tax-Saving schemes offered by ICICI Bank under which you can save tax under Section 80C of the Income Tax Act. You can start with a lump sum investment of Rs 10,000 in a year. It offers assured returns. No premature or auto-renewal facility is available.
2. National Pension System: This is a Government-sponsored Income Tax Savings scheme that lets you plan your retirement and save tax under 80C of the Income Tax Act. NPS is a voluntary market-linked scheme that is managed by professional fund managers. You can start with a minimum investment of Rs 500 per month. The rate of interest could vary between 3% and 10% per annum. 
3. Public Provident Fund: This is a long-term investment scheme wherein all deposits made under the account are subject to tax deductions under Section 80C of the ITA. The interest and accumulated amount are also exempt from taxes at the time of withdrawal. PPF allows a minimum investment of Rs 500, which can be in lump sum or split in 12 monthly instalments. The current rate of interest is 7.1% per annum.
4. Equity Linked Savings Scheme (ELSS): ELSS is a market-linked tax saving scheme that allows you to save tax u/s 80C of ITA. It is the only category under Mutual Funds offering tax benefit. Starting with a regular Systematic Investment Plan, you can do a minimum of Rs 500 periodically. Since ELSS investments are focussed on equities, you can earn high returns at the rate of 15% p.a., provided it is done with a long-term investment approach. ELSS has 3 years lock-in period wherein you cannot make the premature withdrawal.
5. Unit Linked Investment Plan (ULIP): Under Section 80C of the Income Tax, ULIP lets you save tax up to Rs 1.5 lakh in a year on the premiums paid towards the scheme. It is a combination of investment and insurance scheme. The rate of interest can range from 5% to 10%. The investments in ULIPs are subject to risks as it is associated with the capital market. 
6. Life Insurance: Having a Life Insurance policy is one of the essential parts of financial planning. More than letting you save tax on the premiums paid under Section 80C, an insurance policy provides financial security to your family in case you’re not around.

As a taxpayer, you can invest in any of these Income Tax Savings schemes taking into account your financial needs.

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