Top 5 ways to save tax on Investment

Posted by Raghav Mehera on March 25th, 2019

Investing is a perfect way to make wealth for the future. But the thing is that one will have to pay tax on the income earned from most of the investment options and thus knowing your income tax liability prior to choosing an investment option is crucial. There are numerous tax-saving investment options available in the market that offers the advantage of tax-free income. The best way to reduce tax liability is an investment in tax saving instruments. Investment can help to save taxes and is an ideal choice of investment option as it also assists you to increase wealth in the future.

Mentioned below are some of the ways to save tax on investment:

• ELSS investment: Equity linked saving schemes (ELSSs) is an ideal way to make profits complete non-taxable. But there is a condition as far as ELSS investment is concerned like one cannot sell the equity shares prior to a period of one year as anything less than a year can incur tax on profits.
• PPF (Public Provident Fund): Public Provident Fund is a government established savings scheme with tenure of fifteen years available at most post offices and banks in India. The rate changes almost every quarter and the interest on PPF are tax-free.
• Life Insurance Premiums: Premiums for insurance policies such as term insurance, ULIPs, and endowment policies are tax deductible up to Rs 1.5 lakh. But the insurance cover must be no less than ten times the annual premium. The sum that you get on maturity of life insurance policies is free of tax, which indicates it will not be included in the income which is taxable. But, this is likely only if the premium paid does not increase ten% of the sum guaranteed on maturity. In regards to policies before April 1, 2012, the limit is twenty percent of the sum assured on maturity for premium paid on a policy.
• National Saving Certificate or NSC: A National Savings Certificate has tenure of five years and a fixed rate of interest. The interest on NSC is also counted towards the INR 1.5 lakh 80C limit automatically and is tax-deductible if no other investments are using up the limit. NSC is a fixed income investment scheme that you can open with any post office. This is an initiative of Indian Government that supports subscribers to invest when making savings on tax. Any person who is looking for a safe investment avenue to save taxes while earning a stable income can choose for this scheme.
• Home Loans: You can use your home loan to save more tax efficiently. A home loan is eligible for tax deduction under section 80C. And when you purchase a house on a home loan, it comes with numerous tax benefits too that considerably reduce your tax outgo.

These are some of the most common ways by which can save a lot of tax on investment. But, taxpayers are advised to evaluate the advantages and disadvantages before making a final decisi