From PPF to NPS: an overview of some investment options that save income tax

Salaried people can save a lot of money through various avenues available for tax savings if planned and executed appropriately. It is always better to start your tax planning at the beginning of the year rather than towards the end. An early start allows for better planning and allocation.

Vikas Singhania, CEO of TradeSmart, says investing in tax saving instruments is most popular among taxpayers. Tax deductions are permitted on amounts invested in specified instruments under Section 80C of the Income Tax Act 1961.

Some popular investment options include Employee Provident Fund (EPF), Public Provident Fund (PPF), Fixed Deposits with a minimum term of 5 years or more. Life insurance policies, ELSS mutual funds, National Pension Scheme (NPS) and other retirement schemes.

As of April 1, 2022, the start date of the 2022-23 financial year, all individual salaried taxpayers have had the option of choosing the old income tax regime or opting for the new one.

“Investments up to 1.5 lakh per fiscal year is allowed for deductions. This is applicable if the taxpayer follows the old tax regime. In the event that the taxpayer opts for the new tax regime which provides preferential tax rates, many tax deductions and exemptions available under the old tax regime, such as the Section 80C benefit, will have to be discontinued,” said Vikas Singhania.

Use Section 80C to save tax

● Pension plans

● PPF accounts

● Equity UCITS

● Tax deposits over 5 years

  • Life insurance policies or term plans

The deadline for filing income tax (IT) returns for the 2021-22 financial year is July 31. This means that taxpayers must file returns before this date, unless the center extends it. Often, taxpayers wait until the last minute to file their tax returns.

While planning how to save tax on your hard-earned money, a crucial activity, it is essential to evaluate good income tax saving plans.

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Dorothy H. Lewis