Tax savings is an important aspect for any taxpayer. It is an investment-linked decision an individual makes to fulfill his savings goal.
Some of the important investment options to consider while planning for 2018 are as follows:
Equity Linked Savings Scheme (ELSS)
Equity linked tax saving schemes are diversified mutual funds with two fold purpose. One is tax savings as it qualifies for tax rebate under section 80C of Income Tax Act, 1961 up to 1.5 lakh a year. Second, it has a lock-in period of three years.
There are a number of hybrid schemes linked to ELSS; for example, dividend or growth option. Dividend option can be used by those looking for regular income while growth option can be for long-term investment needs.
The return in ELSS investment depends on the performance of the equity markets.
Public Provident Fund (PPF)
PPF is another lucrative option. It currently offers a return of around 7.9 percent per annum. It is a 15-year scheme that can be extended further. The minimum investment is INR 500 while the maximum investment is up to 1.5 lakh. This is a combined limited for self or for self and minor account.
The tax saving scheme suits long-term investment goals. It is for investors who do not want to take risk by investing in equities.It can be considered a good avenue for salaried investor.
Employee Provident Fund (EPF)
EPF can be considered as another good tax saving option for a salaried investor. It helps accumulate corpus and at the same time helps in tax savings. An employee under the scheme contributes 12 percent of the salary and the same amount is contributed by the employer.
The employee can take a tax benefit of up to INR 1.5 lakh under section 80C of the Income Tax Act, 1961.
Unit Linked Insurance Plan (ULIP)
ULIP is a hybrid scheme that includes insurance and saving. ULIP provides a scheme of sub options with investment in debt or equity. The scheme can be modified with the changes in the market conditions.
ULIP generally has a lock-in period of 5 years. It is a scheme with duration of 15 to 20 years. ULIP offers tax benefit under section 80C of Income Tax Act, 1961.
ULIP is for the long-terminvestors as the benefit comes after an average period of ten years.
Sukanya Samriddhi Yojana (SSY)
SSY is a scheme for the girl child. It is a deposit scheme. An account can be opened after the birth. The minimum deposit is INR 1000. A maximum of INR 1.5 lakh can be deposited during the year.
The account is operative for 21 years from the date of birth or till the time she gets married after 18 years. The interest that can be earned on the account is 8.5 percent.
The SSY earns E-E-E status, which is Exempt-Exempt-Exempt status.
The above-mentioned are some tax saving schemes that would come handy while planning investments for the year 2018. A sound financial planning always helps in tax savings and wealth maximization.