Popular Tax Saving Options for Salaried People
As the end of the financial year comes closer, lot of tax payers rush to make investments in order to avail discount on taxes. Most of them do not have the knowledge of the various tax saving options and often makes mistake in choosing an investment option in an attempt to save taxes. And, when they realize that they have invested their hard earned money in an investment instrument that offers minimal benefit in terms of return. All they do at this point of time is — console themselves that they have at least saved on their income tax.
The Indian Income Tax Act offers numerous allowances and incentives apart from the famous Section 80C that can substantially reduce the tax liability of salaried people. Some of the most popular and good options for saving income tax are listed below:
· Life Insurance: One of the most popular options that substantially reduce the tax liability is investing on a life insurance policy. It not only helps in getting tax relaxation but also offers security to an individual’s family. Hence, most individuals, especially for the breadwinners, getting a life insurance policy is the foremost thing in order to make sure their family is secured. Today, there is plethora of life insurance policies with different benefits offered by different companies; however, one thing that is common among all is that it offers tax benefits irrespective of its type and nature.
· National Savings Certificate (NSC): National Saving Certificate (NSC) is another popular investment instrument that offers tax benefits under Section 80C of the Income Tax Act. Although it is a good option to save taxes, it does not offer high-returns on investment and the lock-in period is quite high. It is a good tax saving option for individuals with low risk appetite.
· Tax Saving Mutual Funds: Comparatively newer option for saving tax is investing in mutual funds that offer tax benefits. ELSS, Equity Linked Saving Scheme is one of the most popular and ideal mutual funds that offer tax benefits under Section 80C. It is a mutual fund that invests 65% in equity related instruments that are declared to avail tax benefits. This fund has a lock-in period of three years. Since this fund is linked with equity, investing in ELSS comes with a little market risk. However, if you are investing with an intention to continue for a period of 3–5 years, this can be good choice. It not only offers good return on investment but also offers tax benefits and this makes the fund one of the popular choices among the investors. Apart from this, you can as well invest in Reliance Retirement fund as this offers a long term benefit both in terms of return and tax saving.
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