Widely read:
The financial year is nearing its end, and it's that time when you scramble to make your tax-saving investments. While it's always better to start your tax planning at the start of the financial year, we don't want to waste your time giving gyan. We understand that you wouldn't be reading this if you were actually an early starter.
So, without wasting more time, let's explore the best tax-saving options because you can still invest up to Rs 1.5 lakh and claim tax exemption.
Are you a salaried individual?
Your Employees' Provident Fund contributions are covered under Section 80C of the Income Tax Act. So, if you contributed Rs 36,000 as provident fund this financial year, this amount can be part of the Rs 1.5 lakh that is eligible for tax deduction.
Do you have dependents who rely on you?
If you do, you must buy term life insurance if you haven't already. Your life insurance premium is tax-exempted as well.
Go for only term insurance.
Avoid endowment plans or unit-linked insurance (ULIPs). They neither provide good returns nor sufficient coverage. While term insurance doesn't offer survival benefits, it gives high coverage at a reasonable cost.
Confused between the old and new tax regime? This tax calculator gives you the answer.
Do you want to save tax and create wealth at the same time?
In that case, tax-saving mutual funds - also called equity-linked savings schemes (ELSS) - are the most suitable. They are transparent, well-regulated and offer good long-term returns.
They also have the shortest lock-in period of three years among all tax-saving alternatives.
Since ELSS funds invest in equity, there's no guarantee that your wealth will grow. That said, historical data suggest that equity is the best asset class to grow your money in the long run.
If you are a premium subscriber, get a list of our hand-picked tax-saving mutual funds (ELSS).
The tax exemption limit is Rs 1.5 lakh. Can I further increase my tax benefit?
Let's introduce you to the National Pension Scheme (NPS). It is a pension solution.
This investment allows you to save an additional Rs 50,000 tax, as per Section 80CCD(1B) of the Income Tax Act.
Going beyond Section 80C
Did you know you can save additional taxes by repaying your home loan, paying rent, footing your child's tuition fees, among others? We suggest you use our tax calculator to get the maximum tax benefit you can.
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