These tax-saving investment options are good for last-minute tax savings
Equity Linked Savings Schemes (ELSS)
It is a kind of mutual fund which allows its investors to invest in the stock market and claim tax deductions under Section 80C of the Income Tax Act 1961 up to Rs 1.5 lakh (global). If an investor were to invest Rs. 50,000 in an ELSS, then that amount would be deducted from the total taxable income of the taxpayer
The program comes with a three-year lock-in, which is the shortest lock-in among tax-saving investments. You can invest in ELSS funds through a lump sum or SIPs (systematic investment plans). There is no limit to how long you can stay invested in an ELSS fund after the 3-year lock-up period.
Funds are tailored to specific investment objectives and levels of risk. The fund does not allow early withdrawals because the fund has a blocking period. Instead of trying to take advantage of the quick tax relief of ELSS funds, you should invest frequently for your own long-term gain.
If you are not a risk taker, you can opt for the provident fund (PF). It is an alternative for risk-averse people who do not want to participate in turbulent financial markets such as mutual funds or the stock market and want to invest for the long term. You can use the Voluntary Provident Fund (VPF) to increase your contribution up to 100% of your base salary in your employer’s Employee Provident Fund (EPF) scheme.
In a recent development, the EPF interest rate has been reduced from 8.5% to 8.10% per annum applicable for the financial year 2022-23. Despite this reduction, it is more than any other comparable debt investment scheme and it is also tax free on retirement if your annual contribution does not exceed Rs 2.5 lakh. Investing in EPF is safe and secure.
If you do not have an EPF account, you can still choose to invest in the provident fund by investing in the Public Provident Fund (PPF). The program is supported by the Indian government. It is one of the most popular long-term investment options that offers a high level of security for your money.
You’ll also be able to earn a competitive interest rate and receive tax-free returns. Investors even benefit from facilities such as loans, withdrawals and account extensions. PPF currently offers 7.1% per annum. It offers tax advantages and the advantage of guaranteed returns over the long term. It is a risk-free and tax-free investment option.
To note– Contributions to both EPF and PPF are exempt from tax under Section 80C. These investment tax benefit products can be part of your long-term goal planning. Both systems are long-term and therefore illiquid.
Health insurance plans
A health insurance policy not only offers financial assistance in case of emergency but also provides various other financial benefits. These plans give you financial protection against medical emergencies as well as a tax deduction.
The premium paid for health insurance for yourself or your family provides tax benefits under Section 80D of the Income Tax Act. Deductions can be claimed for two different policies. However, the amount of tax benefit you can claim is limited. The maximum deduction that can be claimed for any group is Rs 30,000 if the police members are under 60, or Rs 50,000 if they are 60 or over.