Taxes deduct a significant chunk of your investments. They prevent you from acquiring high returns and restrict your investment growth. While there is no set way to avoid them entirely in your investment journey, you could dodge them through specific schemes.
Through investment plans like Tax Saving Funds, you get to enjoy tax benefits. They are Mutual Fund or government-led schemes that offer you such perks. They use specific tax-saving instruments to fulfil your other investment needs. This way, you can build your wealth without any worries. Following are the types of Tax Savings Schemes you should consider:
- PPF
Public Provident Fund is the most popular Tax Saving Scheme. It is a long-term scheme that incorporates various tax benefits. The main objective is to help investors prepare for an easy retirement. For this, it allows a maximum of Rs. 1.5 lakh to be claimed for tax exemption. Also, the maturity period of a PPF is fifteen years. However, it is further extendable for up to five years.
- ELSS
Equity Linked Savings Scheme is a diversified Mutual Fund Investment. It has two primary features. They are as follows:
- The investment amount in such funds is eligible for tax exemption. However, it should fall under the maximum limit of Rs. 1.5 lakh. This feature regulates under section 80C of the Income Tax Act.
- The lock-in period of ELSS investments is three years. The interest rate during this period ideally ranges from 15%-18%.
ELSS also allow investors to diversify their investment portfolio. This way, they substantially minimise their market risks. Also, they gain long-term capital returns.
- Bank Fixed Deposit Schemes
Bank Fixed Deposit schemes are guaranteed investment return options. Their tenure via Bank FDs is five years. Such plans offer specific tax-saving investment features. They further help investors acquire tax-free income. Like ELSS Funds, these are also tax-free and long-termed. Hence, they are ideal for low-risk investors. They let you claim tax exemption up to a maximum of Rs. 1.5 lakh.
Moreover, they allow you to change their interest rates every quarter or financial year. But they prohibit premature withdrawal.
- Senior Citizen Saving Scheme
The Senior Citizen Saving scheme is a government-backed investment plan. It provides tax benefits to senior citizens. Its primary purpose is to offer efficient financial assistance to individuals above sixty years. Those under this age cannot avail of this facility. Under this scheme, investors may make a one-time deposit from their online Bank Account. The amount of the same could be as little as Rs. 1000.
The maximum amount could go up to Rs. 15 lakh in cases of joint holding. Also, the interests are payable every quarter. The Senior Citizen Scheme also offers the highest interest rates compared to other schemes. Moreover, it provides guaranteed returns to investors. This helps them reap the benefits of investing quickly.