While investments can help people grow their wealth and get financial protection, they can also provide investors with tax benefits. There are various investments that can lower the investor’s tax liability.
In this article, we will discuss 5 investments that can help people save on taxes.
Every person looks for investment options that can offer good returns and provide financial security to their family. While there are instruments that can help investors meet such goals, there are options that can also offer tax benefits.
With the help of tax saving investments, a person can lower his/her tax liability. Thus, an investor can increase his/her wealth as well as save money on taxes.
Here are some of the tax-saving investment plans that can help save taxes-
- Unit-Linked Insurance Plans
Unit-linked insurance plans (ULIPs) are unique products that provide the benefits of life cover and investment. When a person invests in a ULIP, a part of the premium gets invested in various instruments like equity and debt funds, and the remaining amount goes towards life cover.
Thus, with the help of a ULIP, an investor can build a financial corpus and provide financial protection to his/her family. Furthermore, ULIPs provide tax benefits to investors. Under Section 80C, the premium paid to purchase this policy can be claimed as a tax deduction.
- National Pension Scheme (NPS)
NPS is one of the best retirement plans. NPS Tier-I account can provide good investment options as well as tax benefits to self-employed individuals and employees.
The contribution made by an individual falls under Section 80CCD(1), which is a part of Section 80C. Self-employed individuals can claim up to 20% of their gross income. Salaried individuals can claim a deduction of 10% of their salary.
The employer’s contribution towards NPS falls under Section 80CCD(2), a part of Section 80C. The maximum amount a person can claim as a deduction is either 10% of basic salary plus Dearness Allowance (DA) or the employer’s NPS contribution. Self-employed individuals can’t claim this benefit.
Individuals can claim an additional amount of Rs. 50,000 if they have made any other self-contributions as tax benefit under Section 80CCD(1B).
- Health Insurance
Purchasing health insurance is very important. It can provide financial assistance in case the policyholder requires medical treatment. As medical costs can be expensive, a health insurance policy can protect the insured person from such expenses.
Apart from this advantage of buying a health insurance plan, it can also help in providing tax benefits. Under Section 80D, the premium paid to purchase health insurance can be claimed as a tax deduction.
- Equity Linked Savings Scheme (ELSS)
ELSS is one of the best investment options if a person wants to earn good returns and save on taxes. Such schemes can provide high returns because they are equity investments. Furthermore, investments made in ELSS can be claimed as a tax deduction under Section 80C up to Rs. 1.5 Lakh.
- Guaranteed Savings Plan
Guaranteed savings plans offer a fixed minimum return. The money in such a plan can be claimed as a tax deduction under Section 80C up to Rs. 1.5 Lakh.