It’s that time of the year when you need to invest in different investment products to enable tax savings for FY 2021-22 OR else regret after March that you did not utilize the benefit of various deductions available for you

Now a days, nobody wants to invest just for Tax savings, everybody wants such investment products which not just help us in save taxes but also cater to your need of long term investment

Here is a list of 10 such investment products which helps you in both- dual function of save taxes as well as long term investments.

1. Tax Saver Mutual Fund (ELSS)

Tax Perspective: – One of the most attractive way to save tax nowadays is investment in Tax Saver Mutual Funds (ELSS). The sane has a time bound of 3 years, which means you cannot sell the fund before expiry of 3 years.

Investment Perspective: –ELSS is mutual fund just with time bound of 3 years. As we all know the inherent risk of mutual fund, that they are subjected to market risk. The amount you will receive on sell of fund will depend on the market conditions prevailing at that point of time. Mutual fund is usually known as medium risk medium return in terms of investment.

2. National Pension Scheme (NPS)

Tax Perspective: – The Advantage of Investment in NPS is that you get additional deduction of Rs 50,000/- over and above the deduction mentioned for 80C of Rs 1,50,000/-. Thus this is an attractive option for saving additional taxes.

Investment Perspective: –The amount invested under NPS will be returned in instalment after the person attains the age of 60 years along with interest. The time range for which the person has to be invested in NPS makes this investment product less appeal among youngsters. This investment instrument is one of the best in terms of retirement perspective.

3. Investment in House coupled with Housing Loan

Tax Perspective: – There are numerous advantage of buying a house as an inestment. First of all the stamp duty and registration charges paid on the same is allowed as a deduction under section 80C.

Now if the house is bought via loan, then the person gets the dual benefit of Instalment paid. The Interest amount of the instalment is allowed as deduction under house property and the principal amount of the instalment is allowed as deduction under section 80C.

Many people use investment in house and buying the same on loan as a tax planning tool

Investment Perspective: –Investment in House in considered one of the best investment as the value of the same appreciates year on year. Further the same can be given on rent to achieve positive cash flow. However if the same is used as your stay then the same is not considered as investment as you will never sell the place where you live.

4. LIP (Life Insurance Premium)

Tax Perspective: – Life Insurance Premium Paid for the year is allowed as deduction against your income earned subject to overall limit of Rs 1,50,000/- under section 80C. The maturity value is exempted on fulfilment of certain conditions

Investment Perspective: –The premium is accumulated and you get the accumulated amount along with interest returned either at time of maturity or time of death whichever earlier. This investment instrument helps to safeguard your family in the time of crisis. 

5. ULIP (Unit Linked Insurance Plan)

Tax Perspective: – ULIP Premium Paid, same as LIP, is allowed as deduction against your income earned subject to overall limit of Rs 1,50,000/- under section 80C. The maturity value is exempted on fulfilment of certain conditions

Investment Perspective: –Portion of the amount of premium paid is invested in capital market securities and thus the maturity value depends on the market conditions. This investment instruments helps to counter the inflation aspect which is not looked after by standard LIP payment.

6. PPF (Public Provident Fund)

Tax Perspective: – PPF paid is allowed as deduction against your income earned subject to overall limit of Rs 1,50,000/- under section 80C. The maturity value is exempted on fulfilment of certain conditions.

Investment Perspective: –PPF is a safe bet in terms of investment. The amount cannot be withdrawn for 12 years other than fulfilment of certain conditions. The Interest rates ranges around 6-7%.Minimum Amount of Payment every year has to be Rs 500/- and maximum Rs 1,50,000/- 

7. Post Office Time Deposits

Tax Perspective: – The amount invested under Post Office Time Deposits is allowed as deduction u/s 80C subject to maximum of Rs 1,50,000/-. The time deposit has to be for 5 years to be eligible for tax deduction.

Investment Perspective: –Post Office Time Deposit is a time bound deposit. The Interest rate ranges around 6-7%. The Interest is accrued every year and you receive the same on maturity. The Interest earned is chargeable to tax.

Save Taxes the Right Way (Invest+Tax Savings)

8. NSC (National Savings Certificate)

Tax Perspective: – The amount invested under NSC is allowed as deduction u/s 80C subject to maximum of Rs 1,50,000/-.

Investment Perspective: –NSC is another time bound investment. The interest rates are governed by government and the same varies between 6-7%. The Interest is accrued and thus not chargeable to tax.

9. Senior Citizen Savings Scheme

Tax Perspective: – The amount invested under Senior Citizen Savings Scheme is allowed as deduction u/s 80C subject to maximum of Rs 1,50,000/-.

Investment Perspective: –As the name suggest, the same can be invested only by senior citizens, above 60+ years. The Interest rate is the highest in case of time deposits. The Interest amount is chargeable to tax.

10. Tax Savings Fixed Deposit 

Tax Perspective: – The amount invested under Tax Savings Fixed Deposit is allowed as deduction u/s 80C subject to maximum of Rs 1,50,000/-. Such Tax Savings FD have a time bound of 5 years, amount cannot be withdrawn before 5 years.

Investment Perspective: –The amount is blocked for 5 years. The rate depends on various banks, however the same varies between 6-8%. The Interest amount is chargeable to tax.

Conclusion:-

So next time you invest just for saving taxes, do make sure you choose the right investment product.

Disclaimer:- The above is only an indicative list, the author does not tend to provide any recommendation and you shall consult a tax professional before investing to get dual benefit of long term investment as well as save taxes. For any queries the author can be reached at vaibhav.chheda8@gmail.com

Author Bio

Qualification: CA in Practice
Company: N/A
Location: Mumbai, Maharashtra, India
Member Since: 06 Mar 2022 | Total Posts: 3
CA in practice since 2015, gained experience in the filed of Taxation. Currently associated with Kamal Dhanuka & Co as a partner View Full Profile

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