Tax saving is a very big and stressful task for most individuals any where in the world, whether they are salaried employees or running a business as a proprietor. By investing in any government or private Depository scheme for tax saving, you do not just reduce your tax Liability , but you also secure your financial future through simple savings. The government provides many different paths for taxpayers to minimize their taxes under Section 80C and other sections of the Income Tax Act. With these investments, you do not just lower your tax Liability, but you also move forward on the path of wealth creation.
Let us understand this with an example. If an individual invests Rs 1.5 Lakh in a Depository scheme, they save Rs 1.5 Lakh of taxable income yearly. This reduces their tax liability. Along with this, if they continue to save this amount for next 25 years, they can build a corpus of around Rs 1 Crore at an estimated return of 7%. If both husband and wife are working and each invests Rs 1.5 Lakh every year, both will reduce their individual taxes. Additionally, both will individually build a corpus of around 1 Crore each. This small investment can take you very far in your wealth creation journey.
Tax-saving investments can be categorized into the following types:
1) Tax Saving FDR: They offer tax deductions of Rs 150000/-under Section 80C and Tax-saving FDs come with a lock-in period of 5 years, which means your money remains invested for this duration and you can’t withdrawal or break your Saving FDR before its maturity.
2) PPF: PPF is a long-term savings and investment scheme offered by the Government of India .They offer tax deductions under Section 80C upto 150000/-
3) National Savings Certificate :NSC is a government backed savings scheme available to Only Indian residents who can take the benefit of tax deductions under Section 80C. It has a lock-in period of 5 years and provides a guaranteed return.
4) Sukanya SamRiddhi Yojana: Sukanya Samriddhi Yojana is an excellent tax-saving investment scheme in India that is specifically designed for the benefit of the girl child. Scheme comes with a lock-in period 21 years.also can take the benefit of tax deductions under Section 80C upto 150000/-