With 2020 just around the corner, are you scurrying around to reduce your liable tax? There are several factors like risks, returns, and flexibility that impact tax investments. Tax saving investments can ensure the growth of your money rather than letting it sit idle in your bank lockers.
As the year comes to an end, there is a rise in the asset classes, which garner better returns. Therefore, let’s take a look at the best investment options that can help you save your money for a better future:
- Unit Linked Insurance Plan (ULIP)
A ULIP plan is a dual-benefit product, which offers you with investment as well as insurance. When you invest in a ULIP plan, your investment is channelled towards equity funds and debt funds. A ULIP plan is a single investment platform for all types of investors. For instance, if you’re a risk-averse investor, you can opt for debt funds and vice versa.
Under a ULIP plan, you can make the most of two benefits:
- Receive a life coverage to protect your investment goals
- Enjoy tax-saving benefits on premiums and maturity payout.
With a ULIP investment, you can claim a deduction up to Rs. 1,50,000 on your taxable income under Section 80C of the Income Tax Act, 1961. In addition to this, the maturity proceeds that your loved ones receive in your absence are tax-free under Section 10(10D) of the Income Tax Act, 1961.
- National Pension Scheme (NPS)
Under NPS, you can observe several changes in the investment as well as contingent tax rules. The 60% amount that you withdraw during your retirement period can be considered tax-free, which was 40% previously. Moreover, you can invest 75% of your money in equity this financial year. The new changes made in NPS makes it a better investment option for saving taxes.
- Equity Linked Savings Scheme (ELSS)
ELSS funds are another investment options with better tax-saving opportunities. It is a short-term investment solution, which offers a lock-in period of three years. When you regularly invest in ELSS, you can gain better profits and returns. Under ELSS, your returns can fluctuate since these returns are not fixed. If your invested capital is more than Rs. 1 Lakh, you can be eligible to receive a 10% tax benefit.
- Public Provident Fund (PPF)
When it comes to tax-deductions, PPF is a great investment instrument for AY 2020-21 as it offers fixed returns and tax benefits. When you invest in PPFs, you can extend your investment even after maturity in case you aren’t in the urgent financial need.
PPFs has a lock-in period of 15 years. As an account holder, you can take an investment loan after the completion of the third year. Additionally, you can withdraw a partial amount from the sixth financial year of your investment. With a PPF account, you can ensure flexibility and transparency when it comes to taxes.
Your daughters deserve the best of everything. SukanyaSammriddhiYojana is specifically crafted for every parent who has a daughter below ten years. When you invest in a SukanyaSammriddhiYojana, the earned interest is tax-free like PPFs. However, the interest rate varies every quarter since it is not fixed. Under SukanyaSammriddhiYojana, the annual cap limit is Rs. 1,50,000, which can be split. Moreover, you can invest your money for a maximum of two daughters in a single account.
To sum up, although there are multiple types of investments in the market, it’s recommended to diversify your portfolio based on your investment goals. Select an investment tool available under tax rules and make optimum use of rebates, allowances, concessions, and so on. The best way to invest money is by starting early for this AY 2020-21.