Best tax saving investment options in 2022
- How to save tax while investing wisely is a crucial part of every working person’s life.
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AdvertisementThe best time to start your tax saving investments is at the beginning of a calendar year or a financial year. While tax planning is important, getting aware of all tax saving schemes and choosing the right one is crucial.
Tax saving schemes ensure you don’t pay more taxes and make money in the long run by investing in savings-oriented schemes. Here are some of the best tax saving options with a deduction of up to ₹1.5 lakh in your income tax for the year.
Here are a few options of tax saving schemes:
ELSS Mutual Fund
Equity-linked saving scheme (ELSS) is a type of mutual fund scheme that primarily invests in equity funds. ELSS offers tax benefits to investors. The investments in the scheme are eligible for tax deduction under section 80C of the Income Tax Act, 1961 up to a maximum of ₹1.5 lakh.
One can invest through both lump sum and systematic investment plans (SIP) to avail the tax deduction. This way, ELSS offers both investment and tax saving benefits.
Here are the five top performing ELSS funds in the industry:
Source: Value Research
|Funds||% return in last 3 years|
|Quant Tax Plan||37.52%|
|BOI AXA Tax Advantage||30.92%|
|Mirae Asset Tax Saver||26.53%|
|Canara Robeco Equity Tax Saver||26.19%|
|IDFC Tax Advantage (ELSS)||24.54%|
National Savings Certificate (NSC)
NSC is a fixed income tax-saving investment plan that you can open with any post office branch. The scheme is an initiative of the government of India and hence is relatively safer. The investment in NSC qualifies for deduction under section 80C of the income tax act of up to ₹1.50 lakh.
These certificates earn an annual fixed interest of around 6.8% per annum (revised every quarter by the government), thus guaranteeing a regular income for the investor. The scheme has two types of certificates -- 5-year and 10-year.
National Pension Scheme (NPS)
NPS is a pension cum investment scheme launched by the government of India to provide old age security to citizens of India. The scheme offers tax saving options to both government and private employees. Any citizen between the age of 18-60 can invest in it. The amount invested by the depositor is invested in several schemes including the equity markets. Again the basic amount of deduction offered by the fund is up to ₹1.5 lakh on the same amount of investment. However, NPS allows one to get an additional ₹50,000 deduction under section 80CCD (1B), taking the overall tax deduction amount to ₹2 lakh.
Unit Linked Insurance Plan (ULIP)
ULIP is offered by insurance companies that, unlike a pure insurance policy, gives investors both insurance and investment under a single integrated plan.
A portion of the premium paid by the policyholder is utilised to provide insurance coverage to the policyholder and the remaining portion is invested in equity and debt instruments. ULIP also provides tax deduction up to ₹1.5 lakh.
Here are the top 5 best performing ULIP plans in the industry:
|ULIP plans by insurance companies||% returns in last 3 years|
|PNB MetLife - Met Pension Plus||27.40%|
|AEGON Life iMaximize Plan - Opportunity Fund||23.40%|
|Bharti AXA Life - Future Secure Pension - Growth Opportunities Pension Plus||23.30%|
|Future Pension Advantage Plan - Future Pension Active||21.80%|
|Kotak Platinum Edge - Frontline Equity Fund||21.40%|
Public Provident Fund (PPF)
PPF is one of the safest investment options to start with that can help you secure your retirement and save tax as well. The PPF has a minimum tenure of 15 years with as little as ₹500 to open an account.
You can open a PPF account through a post office or in any nationalised bank.
AdvertisementIncome tax exemptions are applicable on the principal amount invested in a PPF account. The interest rate for PPF is set and paid by the government for every quarter which is currently at 7.1%, more than the savings rate in banks. Taxpayers can claim a maximum deduction up to ₹1.5 lakh.
Sukanya Samridhi Yojana
This is a small deposit scheme by the government of India targeted for the parents of a girl child as part of ‘Beti Bachao, Beti Padhao’ campaign. The scheme encourages parents to build a fund for the future education and wedding expenses for their female child.
Sukanya Samridhi Yojana scheme offers interest rate of upto 7.6% along with tax deduction of up to ₹1.5 lakh. The account can be opened at any post office in India or at a branch of any authorised commercial bank.
If you have taken a home loan to buy a new house, you are also allowed to claim a deduction of up to ₹1.5 lakh under section 80C of the income tax. The deduction can be claimed on the principal amount repaid in the particular financial year. Check your home loan interest certificate for EMI payment details.
However, note that even if you put more money i.e ₹1.5 lakh each in any of the above tax saving options like ULIP, ELSS MF, your maximum deduction from taxable income will still be a total of ₹1.5 lakh only.
AdvertisementHowever, investing in NPS can get you an additional ₹50,000 deduction, taking the overall tax deduction amount to ₹2 lakh.
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