When the tax season reaches its peak, it is always a good time for you to ensure you have optimised your tax savings. The government allows individual taxpayers to reduce their tax outgo via various Sections and rules laid down in the Income Tax Act of 1961 and other related Income Tax Rules. Regardless, there is a chance that you may have missed out on some tax-saving opportunities in the past year.
To help you out, here is a list of tax-saving investment options you can opt for at the last minute. These will help you lower your tax liability and retain more of your income.
Last-Minute Tax-Saving Investment Options
Each of the tax-saving investment options mentioned below offers more than just an avenue to save taxes.
Public Provident Fund (PPF)
If you are looking for low-risk last-minute tax-saving investment options, PPF can be the right option. It is a government-backed savings scheme offering attractive interest rates. The best part about investing in PPF is that the returns are safe, assured, and stable. PPF is ideal if you are looking for a long-term investment avenue.
You can easily open a PPF account by visiting your nearest bank.
Tax Benefit: Investing in PPF allows you to claim a maximum of ₹1.5 lakhs under Section 80C of the Income Tax Act 1961.**
Equity-Linked Savings Scheme (ELSS)
Do you want some exposure to the equity markets and save tax at the same time? Investing in ELSS can allow you to enjoy both. It is a type of mutual fund investment plan where your funds are pooled together with other investors and invested in equity instruments. The returns depend largely on market performance, amongst other factors. It is also a compounding interest investment scheme since the returns are reinvested for even higher gains. It has a low lock-in period of 3 years.
While the returns can be high because of exposure to the markets, ELSS also comes with a certain level of risk due to the same reason. So, proceed with due research and guidance.
Tax Benefit: You can claim a maximum of ₹1.5 lakhs under Section 80C against your ELSS investments.**
Unit-Linked Insurance Plans (ULIPs)
These are life insurance plans that have an investment component attached to them. The funds you put into a ULIP do two things. First, they provide life insurance coverage, which means your loved ones’ future is secure. Second, they allow you to enjoy investment-linked returns. A portion of the money is invested into the instruments of your choice which earn returns.
In addition, ULIPs also come under Section 80C’s list of tax-saving investment options. This makes ULIPs an ideal avenue to park your funds at the last minute. They come with a reasonable lock-in period of five years.**
Tax Benefits: Your ULIP premium can be used to claim a maximum deduction of ₹1.5 lakhs under Section 80C of the ITA. What’s more, the maturity returns are also tax-exempted under Section 10 (10D), given certain conditions are met.**
National Pension System (NPS)
It is a government-backed pension scheme. By contributing to NPS in your working years, you create a retirement corpus that gains interest at a specified rate. Once you reach retirement, you receive payouts from this corpus that act as a regular stream of income for you. NPS accounts can be of two types: Tier 1 and Tier 2. Contributions made to a Tier 1 NPS account have a lock-in period until the individual reaches 60 years of age. Only these contributions are eligible for tax deductions.
You can open an NPS account online via the government portal or offline at your nearest bank.
Tax Benefit: What makes NPS a favourable last-minute tax-saving investment option is that Tier 1 contributions come with an additional ₹50,000 deduction under Section 80CCD(1B). This deduction is in addition to the general ₹1.5 lakhs deduction offered by Section 80C. This means you can enjoy up to ₹2 lakhs worth of tax benefits.**
National Savings Certificate (NSC)
Another government-backed tax-saving investment option you need to consider is NSC. It is a safe, fixed-income investment scheme provided by the government. The funds you invest will be completely safe and will also allow you to enjoy tax deductions. Note that it comes with a lock-in period of five years.
Tax Benefit: The Section 80C deduction of ₹1.5 lakhs is also applicable for your NSC contributions.**
Please note:
- The total deduction one can claim under Section 80C is ₹1.5 lakhs. You can club several last-minute tax-saving investment options to reach this amount or opt for a single large investment plan as well.
- Section 80C deductions are only available for those who have opted for the old tax regime.**
There are various ways to save tax at the last moment. You can opt for an ELSS investment plan, create your retirement corpus with NPS, secure your loved ones’ future while gaining returns with a ULIP, or go for another option. To learn more about how to optimise your taxes and get personalised guidance, it is advisable to visit a tax expert.
**Tax exemptions are as per applicable tax laws from time to time.
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