Mutual Funds, NPS to PPF – Top 5 Tax Saving Investment Tools to Save Money

Here we list the top 5 tax savings Investment option where a earnings One can invest his money for higher returns and save income tax in the current financial year:

1]ELSS Mutual Fund: Under section 80C of the Income Tax Act, an income tax payer can claim tax exemption on maximum 1.5 lakhs invested in ELSS mutual funds. this is one Equity Mutual Fund Which gives the highest returns among all available tax saving investment instruments. This mutual fund allows an investor to invest in lumpsum advance or SIP mode. However, while investing in ELSS Mutual Funds, an investor must know that it has a lock-in period of 3 years. The investor should also note that the ceiling will include other items like EPF while claiming tax exemption under section 80C. pf, ppf (Public Provident Fund), etc.

Speaking on ELSS mutual fund Return, SEBI Registered tax and investment expert Jitendra Solanki said, “ELSS mutual funds are just like any other equity mutual fund. If an investor invests in equity fund For the long term, one can expect at least 12 per cent return on their money and can easily beat the average inflationary increase during the investment period.”

2]National Pension System or NPS: It is a unique tax saving investment tool that gives you exposure to both debt and equity through a single investment. An NPS account holder can choose the debt and equity ratio while opening the account. However, an investor cannot get more than 75 per cent equity exposure on one’s money. An investor can claim income tax exemption up to 1.50 lakh in a financial year under section 80C while an additional 50,000 is allowed as a deduction under section 80CCD(e). so, those who Those who have exhausted their section 80C limit by investing in ELSS mutual funds or other tax saver investment instruments can go for NPS account for this additional benefit 50,000 limit available for tax exemption.

Speaking on the NPS scheme, Karthik Jhaveri, Director, Wealth Management, Transcend Capital said, “NPS account holders can have equity exposure above 75 per cent. But, to maintain a balance between equity and debt, NPS account holders can It is advised to maintain a 50:50 ratio. Over the long term, investors can expect 12 per cent return on equity and 8 per cent return on debt, making it around 10 per cent. [{(12/2) + (8/2)}] Net return on one’s NPS investment.”

3]Public Provident Fund or PPF: It is one of the Government backed Small Savings Schemes, which is 100% risk free. PPF interest rates are paid on a quarterly basis and compounded annually. The Government of India announces the PPF interest rate at the end of every quarter. For the January to March 2023 quarter, the central government has announced 7.10 per cent PPF interest rate, keeping it unchanged for the coming quarter starting from New Year 2023. PPF investment also allows the taxpayer to claim income tax exemption. 1.5 lakh in a single financial year under section 80C.

4]Post Office Fixed Deposit: Announcing the interest rate of small savings schemes for the January to March 2022 quarter, the central government has increased the tax saving fixed deposit interest rate from 6.70 percent to 7.0 percent. Retail banks may take time to pass on this benefit, so people who are considering opening a Tax Savings Fixed Deposit Account are advised to open it in a post office as it is directly governed by the government and is open till September Will be automatically available with the start of . New year 2023. However, a fixed depositor must be aware that tax saving term deposits have a lock-in of 5 years.

5]Voluntary Provident Fund or VPF: .f you fall under the tax bracket and your section 80C limit 1.5 lakhs are going tirelessly. You should ask your employer for an additional EPF or PF deduction called VPF. In this VPF option, your employer is not required to invest the contribution amount towards your additional PF contribution, but you will be able to save more in your retirement fund to get ‘EEE’ benefit on your PF contribution. Everyone must know that VPF enables you to get the highest returns from a risk free investment tool. PF interest rate for the financial year 2022-23 is 8.10 percent.

Apart from these 5 options for tax saving, if someone has a daughter, then Sukanya Samriddhi Yojana (SSY) can also be a good option. An SSY account holder can claim income tax exemption under section 80C of the Income Tax Act 1.50 lakh investment in a financial year.

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.