“A penny saved is a penny earned.”
~ Benjamin Franklin
The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act. Section 80C includes various investments and expenses you can claim deductions on up to the limit of Rs. 1.5 lakh in a financial year. There are tax saving options with lock-in like PPF (15 years), NSC (6 years), Tax saving FD (5 Years) and ELSS mutual funds (3 years).
Tax Saving Programs
While tax planning may seem to be a difficult process, Mutual Funds offer you a simple way to get tax benefits, while aiming to make the most of the potential of the equity markets. An Equity Linked Savings Scheme (ELSS) is an open-ended Equity Mutual Fund that doesn’t just help you save tax, but also gives you an opportunity to grow your money.
The National Pension Scheme is a social security initiative by the Central Government. This pension program is open to employees from the public, private and even the unorganized sectors except those from the armed forces. The scheme encourages people to invest in a pension account at regular intervals during the course of their employment. After retirement, the subscribers can take out a certain percentage of the corpus. As an NPS account holder, you will receive the remaining amount as a monthly pension post your retirement. The two primary account types under the NPS are tier I and tier II. The former is the default account while the latter is a voluntary addition.
54EC bonds, or capital gains bonds, are one of the best ways to save long-term capital gain tax. 54EC bonds are specifically meant for investors earning long-term capital gains and would like tax exemption on these gains. Tax deduction is available under section 54EC of the Income Tax Act. 54EC bonds do not allow any tax exemption on short-term capital gains tax. The eligible bonds under Section 54EC are REC (Rural Electrification Corporation Ltd), PFC (Power Finance Corporation Ltd) and NHAI (National Highways Authority of India) and IRFC (Indian Railways Finance Corporation Limited).