Believe it or not, but for most of us, tax planning is a let’s-do-it-later affair. Almost everyone has a tendency to plan for investing in tax saving instruments only when the financial year is about to end. Thus there is no much room left for a prudent investment planning. A smarter approach is to start investing in the early quarters of the financial year, in order to prudently plan on how to get the most of your tax saving investment options. Being proactive, will help you minimize your chances of making a wrong investment in haste.
Let’s have a look at some of the best tax saving investment options in 2017:
- ELSS Mutual Funds
Equity Linked Saving Scheme (ELSS) Mutual Funds are specifically designed for saving your taxes. Being market linked product they are not only a high risk products but also offers the prospective of high returns. Other than ULIP, ELSS is one of the two tax saving investments options that are equity based. It boasts of the shortest lock in period i.e. 3 years among its class of investments.
Investment in an ELSS can also be made through a SIP (Systematic Investment Plan) wherein you can spend a small fixed fraction every month instead of paying a heavier sum altogether. Thus, an ELSS invested through a SIP makes the overall investment easy and affordable.
- Health Insurance
Some might not agree with a health insurance plan being calculated as a tax saving investment option, as it offers no perky returns like the other forms of investment. But the value you get from health insurance coverage makes it much more ‘worthy’ than any other form of investment.
As per section 80D, you can enjoy a tax deduction on the premium that you pay for the health insurance plan. The upper cap for this deduction is considered to be Rs.15,000 and is extendible up to Rs.20,000 for senior citizens. For instance, if a person gets a health plan for both himself and his parents, then he can enjoy a deduction of up to Rs.35,000 on his taxable income. However, section 80D is not valid to the group health insurance given by your employer.
- Public Provident Fund
Public Provident Fund (PPF), a long term saving scheme issued by the Central Government. Under section 80C, the contribution made towards PPF is tax deductible. The upper limit on this contribution is Rs.70,000. Furthermore, the interest earned and received at the maturity is undeniably tax free. Additionally it also assures the investor with an 8 percent rate of return that too on a guaranteed basis as it’s a govt. scheme. The only glitch to PPF is that it sets a lock in period of 15 years, thus not good for those looking for a short term tax-saving investment.
Apart from these there are other investment options too like Life insurance, National Pension Scheme etc. which are not that pure form of investment but is tax saving. To cope up with some of the complexities of payroll like employee management and salary processing employ PayWheel, end-to-end payroll software for small business as well as medium business requirements.
Above discussed points are just to give you a gist on investment options. For accurate and brief information on all these investment options kindly go to the respective legislatures.