Top 5 Tax Saving Investment Options

There are many ways to reduce the tax burden which the salaried class of the Indian economy especially face. The new budget in 2015 has provided the chance to save more with the help of certain investments. The general methods of saving tax are to keep separate tax files for all family members and make gifts to them. The transactions should be such that clubbing provisions are not attracted.

Some of the best investment options whereby taxes can be saved are:

Home Loans:

This might come as a surprise; however, buying a house would not only mean owing a home or an appreciating real estate asset. In the new budget the limit under section 80 C has been raised to 1.5 lakh rupees. This means that principal repayment of home loan can fetch a deduction of up to that. For interest component in a home loan one can claim deduction under section 24 for up to 2 lakhs – up from 1.5 lakhs rupees.

PPF or Public Provident Funds:

These funds offer not only a potent retirement saving option, but also at a veritable rate of 8.7%. The issue is it has a 15 year lock in with withdrawal allowed from the 6th year onwards. However, receipts on maturity are exempt from tax. One can invest up to 1.5 lakhs in this and claim tax deduction for the same up to the same limit under section 80 C. However, Non resident citizens are not eligible for this.

National Savings Certificates or NSC:

NSC remains a popular choice among the average Indian. A potential investor must invest at least Rs. 100 and either chooses a deposit period 5 or 10 years. The interest rate for the 10 year option is 8.8% and 8.5% for the 5 year option – rates of interest fixed annually by the government. However, interest on interest on NSC is taxable with respect to section 80 TTA.

ELSS:

It has a minimum lock in of 3 years. They offer higher returns than all others in this list. While lock in restricts earning. One can opt for dividend option as well to receive income during lock in as well. Since, these are equity based, minimum lock in would make all capital gains long term and thereby tax free.

Other Schemes:

Tax saving Fixed deposits are also an option. These provide interest rates, ranging 8.5% to 9.75 % with a 5 year lock in. Senior Citizen saving schemes enables older people the chance to secure guaranteed returns with the principal sum backed by the government.

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