Six ways to Save Money while filing Taxes
Ways in which you can gain tax exemptions.
We are sure you know that you can save taxes thanks to your home loan or your children’s education fees. Even your medical bills can help you in saving taxes. But then again, you knew this, didn’t you? If you have utilized these avenues, but have not yet reached the ceiling of ₹1,50,000 to save taxes, there are other options available. You can save up to ₹46,000 by making the right investments under Section 80C. You have heard of ULIPs, ELSS Funds, PPF, EPF and so on, right? No? You’re reading about them for the first time? These terms sound alien to you?
Don’t worry, we at Thrive have simplified this for you. By going through the options listed below, you can choose the ideal plan for yourself. After all, wouldn’t you want to take that vacation you have always been planning? Here are our picks:
ELSS Funds — Equity Linked Savings Scheme (ELSS) are the mix of funds which can give highest returns among all the options available. ELSS have a lock in period of 3 years, post which it can be withdrawn. Since the major portion of investment is done in equities, the rate of returns are high. But this comes with a proportional level of risk.
ULIP Funds — Unit Linked Insurance Plans (ULIP) are a mix of insurance and investments. A portion of the amount invested is used (as premium) to provide life insurance coverage, and the remaining is invested in equities and debt instruments. The lock in period is 5 years.
PPF — Public Provident Funds (PPF) are long term investments that are offered by the Government of India. The lock in period is for 15 years, which can further be extended by up to 5 years. The current rate of interest that is offered is 8%. The minimum investment amount is ₹500, and tax break benefits are available for investments up to ₹1,50,000.
EPF — Employee Provident Fund (commonly known as PF) is a fund made up of 12% of a salaried employee’s basic salary and dearness allowance (Note that the employer’s contribution towards the Provident Fund does not come under Section 80C, and it is not eligible for tax exemption). The interest provided is 8.55% PA. The fund can be withdrawn 2 months after leaving the job, provided he/she does not take up a job that has the component of PF in his salary, or works in an organisation not covered by the PF Act.
Tax-saving FDs — It is like a regular fixed deposit, and allows for a tax break for investments up to ₹1,50,000. The lock in period is for 5 years, and the minimum investment amount is ₹1,000. The rate of interest varies from one bank to another, and is between 5.5% to 7.75%.
NPS — The National Pension Scheme (NPS) was started by the Government of India to allow employees of both the organised and unorganised sector to have a source of income after retirement. The lock in period is till retirement. Post retirement only up to 60% of the fund amount can be withdrawn as a lump sum. A partial withdrawal can be made after 15 years, under special conditions (like an accident or marriage). You can choose to invest in equity or debt — returns and risk change proportionately.
Still undecided on what is the ideal fund for you? Don’t worry, you can reach out to us here, and we will help you out.
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