This is the last chance to save tax for the current financial year 2023-24 as salaried individuals are required to submit investment proof to their HR department.
It is that time of the year when most of the taxpayers, who if already haven’t exhausted their tax-saving investment limit, start looking for various investment options to save as much tax as possible. For, this remains the last chance to save tax for the current financial year as salaried individuals are required to submit investment proof to their HR department. Else tax will start getting deducted from their salary.
However, before you decide on how much and where to invest for saving taxes during the current year 2024, it is advisable to evaluate your tax liabilities under both the old and the new tax regime. In case the new tax regime is beneficial for you, there is no need for you to make any investments as deductions under Section 80C and 80CCD are not available under the new tax regime.
If the old tax regime is beneficial for you after taking into account the investments which you have to make, then go for it. Never invest in life insurance products just for the purpose of saving taxes, but you should have adequate life cover to ensure the well-being of your family member in case of any eventuality.
“Since there are many products available for claiming deduction under Section 80C of the Income Tax Act, the decision to invest in a particular product would depend on various factors. In case you are young and, thus, have the ability to take risks, ELSS (Equity Linked Savings Scheme) is the best product as this may give you best returns if you go by historical returns generated by this product. Though the lock-in period of ELSS is only three years, but you may have to stay invested for a longer period. So, the requirement of funds in the future should also be evaluated while choosing this product,” suggests Balwant Jain, a tax and investment expert.
Those who are not willing to take any risk can go for any product which offers fixed rate of interest for the entire period of investment like the National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS) and tax-saving fixed deposits (FDs).
“Those who fall under higher tax slabs and are willing to lock in their money for a longer period can opt for Public Provident Fund (PPF) where the interest earned is fully tax-free. In case you are salaried you can voluntarily decide to contribute more towards your provident fund as this offers highest returns without any risk,” says Jain.
According to financial experts, tax-saving investments like ELSS, PPF, NSC, and long-term FDs play a vital role in trimming tax liabilities. However, it’s advisable to broaden one’s horizon and explore avenues that contribute to overall wealth generation.
“Section 80C of the Income Tax Act provides various tax-saving investment options, allowing deductions of up to Rs 1.5 lakh annually. While ELSS offers tax benefits under Section 80C, equity investments, in general, harbor potential for substantial wealth accumulation in the long run. NPS not only presents tax advantages but also serves as a tool for long-term retirement planning. Balancing equity and debt funds within NPS can align with both tax-saving goals and wealth augmentation,” informs Adhil Shetty, CEO, Bankbazaar.com.
Health insurance premium paid for self, family, or parents qualify for tax deductions under Section 80D. Likewise, life insurance not only secures financially but also offers tax-saving benefits under Section 80C. “Home loan repayments aid in tax savings as interest payments on housing loans qualify for deductions under Section 24 and Section 80C. However, cautious evaluation of factors like location, market trends, legal aspects, and liquidity is essential when delving into real estate investments,” says Shetty.
Opting for SIPs (Systematic Investment Plans) in mutual funds offers a disciplined investment approach, allowing regular small investments. SIPs in ELSS funds not only provide tax advantages but also foster wealth appreciation over time.
Source: https://www.financialexpress.com/money/income-tax-best-tax-saving-investment-options-for-fy2023-24-3357951/
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