Wealth Insights

Paying taxes is important, but why pay more when you can legally save money? The government allows us to invest in certain schemes that help reduce tax while also growing our wealth. Here are some easy-to-understand options you can use to save on taxes.

Equity-Linked Savings Schemes (ELSS)

ELSS funds are mutual funds that help you save tax under Section 80C, allowing deductions of up to ₹1.5 lakh. The best part? They have the shortest lock-in period of just 3 years and have historically given high returns (12-15% per year). However, since they invest in the stock market, the returns are not guaranteed. If you are comfortable with some risk and looking for high growth potential, ELSS can be a smart choice for tax-saving and wealth-building at the same time.

Public Provident Fund (PPF)

PPF is a government-backed scheme that lets you save tax under Section 80C. It has a long lock-in period of 15 years, but the interest earned (around 7-8% per year) is completely tax-free. It’s one of the safest ways to grow your money over time. You can deposit between ₹500 and ₹1.5 lakh per year, making it flexible for different income groups. Additionally, partial withdrawals are allowed after 5 years in case of emergencies, making it a good balance between safety and accessibility.

National Pension System (NPS)

NPS is a great option for long-term retirement savings. You can claim tax benefits up to ₹2 lakh under Sections 80C and 80CCD(1B). Your money is invested in a mix of stocks and bonds, which gives better returns than traditional savings options (around 8-10% per year). The only drawback is that you can withdraw the full amount only after retirement. At retirement, 60% of the corpus is tax-free, while 40% must be used to buy an annuity. This ensures that you receive a steady pension during your retirement years.

Unit Linked Insurance Plans (ULIPs)

ULIPs provide both life insurance and investment benefits. The premium you pay is eligible for a tax deduction under Section 80C. While ULIPs have a lock-in period of 5 years, they offer market-linked returns and long-term financial security. Unlike traditional life insurance, ULIPs allow you to switch between equity and debt funds based on market conditions, giving you more control over your investments while ensuring life coverage.

Sukanya Samriddhi Yojana (SSY)

SSY is a special savings scheme for a girl child’s education and marriage. Parents can invest and claim tax benefits under Section 80C. It offers high, tax-free interest (around 8% per year) and matures when the child turns 21. The scheme ensures that your daughter’s future is financially secure, and partial withdrawals are allowed after she turns 18 to help with education expenses.

Senior Citizens Savings Scheme (SCSS)

This is a safe and steady income option for people above 60. The government-backed scheme gives around 7.4% interest per year, and the investment amount qualifies for tax deduction under Section 80C. The lock-in period is 5 years. It is one of the best options for retirees looking for a fixed, reliable source of income with government protection.

Tax-Saving Fixed Deposits (FDs)

If you prefer a simple, low-risk option, a 5-year tax-saving fixed deposit is a good choice. You can claim a tax deduction under Section 80C, and the returns are around 6-7% per year. However, the interest earned is taxable. It is ideal for those who want a guaranteed return but are okay with paying tax on the interest income.

Health Insurance

Medical expenses can be unpredictable, so having health insurance is important. The premium you pay is eligible for a tax deduction under Section 80D—up to ₹25,000 for yourself and your family, and ₹50,000 if you have senior citizen parents. Besides tax benefits, health insurance protects your savings from unexpected medical expenses, ensuring financial stability.

Home Loans

Buying a house? You can claim a tax deduction on both the principal repayment (up to ₹1.5 lakh under Section 80C) and interest payment (up to ₹2 lakh under Section 24b). First-time homebuyers can get extra benefits under Sections 80EE and 80EEA. This makes homeownership more affordable while reducing your taxable income.

Voluntary Provident Fund (VPF)

If you are a salaried employee, you can contribute extra money to your EPF account through VPF. The returns are around 8% per year, and both your investment and interest earned are tax-free. It’s a great way to grow your retirement savings, as contributions are directly deducted from your salary, ensuring disciplined savings without additional effort.

Conclusion

By choosing the right investment options, you can reduce your tax burden while growing your money. A smart mix of ELSS, PPF, NPS, and health insurance ensures a tax-efficient and financially secure future. Start planning today and make the most of your hard-earned money!