5 Smart Tax Saving Investment Plans for AY 2020-21

“People don’t have the slightest idea how much they have to be thankful foruntil they have to pay taxes on it.”

While this quoteaims tomake your tax planning a bit less taxing, the truth is that taxes can get you feeling blue.Tax-paying is an obligation that every citizen must abide by. But you need not quail. While you may have a brief idea about commonly known investment options, the good news is that by taking advantage of permissible exemptions, rebates, deductions; you can reduce your tax burden.

For this purpose, there is a wide range of tax-saving investments in India, allowingyou to save taxunder the Income Tax Act, 1961. Which means, you can easily reduce your tax-liability for AY 2020-21 by investing in some of the best investment plans for tax-saving.

To help you invest wisely, therefore, we have given below a list ofbest investment plansin India.

Term Insurance

Term insurance is a significant part of planning for the future of your loved ones, especially if they rely on your income. Althoughdeath is grim to think about and no one likes to plan for the same, the fact is that a little distress now can save your dear ones a world of financial stress should the worst happen.

Term insurance is designed to protect your dear ones against unforeseen circumstances after you are no more. In such an event, it offers a lump sum death benefit to your nominees, which allows them to take care of their needs and goals.

And if you are looking for a tax-saving investment plan, then term insurance perfectly fits the puzzle. It offers the following tax benefits:

Premiums paid are tax deductible u/s 80C up to a maximum of 1.5 lakhs in a  financial year
Death benefits are tax-free

Unit-linked Insurance Plan (ULIP)

New-age ULIPs with better transparency and reduced charges have successfully made themselves a must-have financial product in any investment portfolio.This unique investment product offers the dual benefits of investment, along with insurance. Meaning, it not only offers you the opportunity to generate higher returns but also provides you with a life cover to safeguard the financial future of your dear ones.

ULIPs allow you to invest in funds of your choice (debt, equity, and balanced funds) and offers flexibility to switch between funds as per the changing market. Moreover, reputable insurers like Max Life Insurance allow free switching between funds along with the flexibility to choose premium payment term, policy term, and sum assured multiples.

ULIPs not only help you make the most of the potential of the equity markets but also offer tax benefits at the time of investment and maturity.

Tax benefit on investment: A maximum of Rs. 1.5 lakhs is allowed as deduction under section 80C for the premium paid towards the ULIP plan

Tax benefit on maturity/partial withdrawal: Under section 10(10D), the amount received on maturity or partial withdrawal is exempt from tax

Equity-linked Saving Scheme (ELSS)

This open-ended equity mutual fund, popularly known as ELSS, not only allows you to grow your money but also helps you save tax. This is possible because ELSS funds qualify for tax exemptions u/s 80C of the Indian IT Act.

When you invest in an equity-linked saving scheme, you can claim up to Rs. 1.5 lakhs as a deduction from your taxable income in a financial year.

Moreover, you can invest in ELSS as per your convenience by choosing from lump sum or SIP mode of investment.

Public Provident Fund (PPF)

PPF is a popular investment option backed by the Indian Government. This long-term investment option offers safety, attractive interest rate (7.9%) and facilities such as withdrawal, account extension, and loan.

When it comes to tax saving, contributions made towards PPF are eligible for tax deductions u/s 80C, and the deduction limit is Rs.1.5 lakhs. In addition, the interests earned is tax-free, and no wealth tax is applicable on this investment.

National Pension System (NPS)

NPS is a long-term and voluntary investment plan for retirement under the scope of PFRDA (Pension Fund Regulatory and Development Authority) and the Central Government. PPFis a good scheme for investors having a low-risk appetite and for those who want to plan for their retirement. Tax benefits under NPS are as follows:

NPS subscribers can claim tax deduction u/s 80C up to 10% of gross income with the overall cap of Rs. 1.5 lakhs

An additional deduction up to Rs. 50,000 (which is over and above the deduction of Rs. 1.5 lakh )is available under subsection 80CCD (1B)

Now that you know about these tax saving investments in India, invest in one as per your needs and goals to reduce your tax liability in AY 2020-21.


on 09 August 2019
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