The tax provisions under the IT Act, 1961 allow deductions for an extensive range of investment, saving, and insurance products. Apart from helping you save taxes; such products help you secure your financial future. So, what are the best tax-saving schemes in India? Here’s a list of the top 5 schemes.
- Employee Provident Fund
Employee Provident Fund (EPF), one of India’s most popular retirement benefits schemes, requires a salaried employee to contribute 12% of their basic salary to the EPF account. The employer contributes 3.67% of their basic salary to the EPF account, while 8.33% of their contribution is reserved for Employee Pension Scheme (EPS).
The contribution earns interest, as prescribed and regulated by the government. Employee contribution of up to Rs. 1.5 lakhs in a financial year is eligible for deduction under Section 80C.
- Retirement Plans
Most people in India prefer investing in retirement plans offered by private insurers for securing their retirement life. Most of these plans come with a built-in life cover to help the policyholder secure their loved ones’ financial future. In most retirement plans, one can keep investing throughout their working life and receive pensions after retirement.
In case of the policyholder’s demise, the policy beneficiary will receive the death benefits. Premiums paid towards retirement plans with life insurance benefits are eligible for deductions of up to Rs. 1.5 lakhs under Section 80C.
- Life Insurance Plans
Life insurance is an excellent way to offer financial security to your loved ones in case you of your unfortunate demise. Top insurers in the country now offer a wide range of life insurance plans, including whole life insurance, term plans, endowment plans, ULIPs, child insurance plans, and more.
The policy premiums are generally lower for younger policyholders. Under Section 80C of the IT Act, premiums paid towards a life insurance plan are eligible for tax deductions of up to Rs. 1.5 lakhs in a financial year.
- Health Insurance Plans
The medical inflation in the country has led to an ever-increasing quality healthcare costs. Health insurance plans ensures that you never have to worry about increasing medical inflation and still get the best treatments for you and your family. Therefore, it is recommended that you secure your health without worrying by investing in a feature-packed health insurance plan. Apart from individual plans, you can also consider investing in a family floater plan to secure the health of your family members.
Under Section 80D of the IT Act, premiums of up to Rs. 25,000 paid towards a health plan are eligible for tax deductions. If the policy is purchased for a dependent senior citizen parent or if a senior citizen is included in a family floater plan, the deduction limit is extended up to Rs. 50,000.
- Equity Linked Savings Scheme
If equity investments better match your long-term objectives, consider investing in Equity Linked Savings Scheme. These schemes invest your money in equity and generate higher returns in the longer run. However, these plans come with a lock-in period of 3 years.
ELSS is the only mutual fund scheme eligible for income tax deductions of up to Rs. 1.5 lakhs under Section 80C of the IT Act.
Ready to Choose Tax-Saving Products?
While there is no shortage of tax-saving products and schemes in India, you must select the plan based on your needs, expectations, objectives, and risk appetite.
If you’re confused with all the different products available in the market, consult an investment or tax advisor to make the right decision.
