Tax Saving Investment Options for 2023

Many people even start saving as soon as they get their first salary. Tax saving investment options also help in harnessing the power of compounding in long term investments, which helps to grow a small amount of investment at the time of maturity. Know about some of the top tax saving investment options with which you can start your investment journey.

Tax Saving Investment Options for 2023

Public Provident Fund (PPF)

PPF is one of the safest investment options that can be chosen by even those who have just started their investment journey. It is an ideal option for long term investment with safe and high returns. PPF scheme is mandated by the government, hence backed with guaranteed returns. Apart from being a good option for beginner investors, it is also a good way to diversify investments

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People can start with minimum investment 500 in a month. However, there is an annual limit of 1.5 lakh for maximum investment. PPF investment has a lock-in-period of 15 years. Investors cannot withdraw their funds before the tenure and can also choose to extend the tenure for 5 more years.

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However, there is also an option of premature withdrawal with certain limitations. Investors can also avail loan against PPF investments after three years of account opening and before six years. The Government of India identifies the interest received on PPF. The maturity amount of PPF and the total investment earned during the tenure is tax free.

national pension system

The National Pension System is another voluntary and defined contribution retirement savings scheme, designed to provide cover during retirement. NPS offers tax benefits under section 80CCD(1) with an overall limit of Rs. 1.5 lakh under section 80CCE. Additional deduction on investment up to 50,000 in NPS (Tier 1 account) is exclusively provided to NPS subscribers under sub-section 80CCD(1B). There are also tax benefits for the corporate sector, partial withdrawals, annuity purchases and lump sum withdrawals.

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ELSS Fund

For those who want to progress a bit and explore some more tax-efficient investment options, they can try investing in equity using ELSS funds. They are called tax saving funds as they offer maximum tax exemption 1,50,000 from the annual taxable income under section 80C of the Income Tax Act. ELSS Fund is an equity-oriented scheme. It has a lock-in period of 3 years. The amount earned after investing for a tenure of 3 years will be taxed at the rate of 10% by the government as it will come under the category of long term capital gain.

Read also: Can my current investments help in building a decent corpus?

tax saving fixed deposit

Tax Saving Fixed Deposit is a special category of Fixed Deposit that allows investors to claim deduction under Section 80C of the Income Tax Act. Investors can claim maximum tax deduction 1.5 lakh by saving in this option. Tax saving FDs have a lock-in period of at least five years. The account can be opened online or by visiting the bank branch. Interest on tax saving FD varies from bank to bank. Higher interest rates are offered to senior citizens and bank staff members.

Senior Citizen Savings Scheme

Senior Citizens’ Savings Scheme is another attractive investment option that can also help in saving taxes. The minimum deposit amount in SCSS scheme is 1,000. Maximum savings amount is 1.5 million. However, the account opening option is available only to senior citizens. Only retired persons and senior citizens can take advantage of the scheme. There is age relaxation for retired defense personnel also.

health insurance policy

Like many savings plans, health insurance policies also have substantial tax benefits. Under Section 80D, people can also claim tax deductions on healthcare expenses and payment of health insurance premium. The amount of tax saved under the section against life insurance cover is determined by the age and number of people covered under health insurance.

Benefits of Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana was launched by the government under its flagship program of ‘Beti Bachao, Beti Padhao’. People can open SSY account of their girl child in their nearest banks. The account can be opened any time after her birth till she attains the age of 10 years. The guardian can handle the account and can access it till their daughter turns 18. The minimum account balance is 250 and the maximum deposit amount is 1,50,000. Investments under SSY account are eligible for tax deduction under section 80C. Maximum investment limit is 1.5 lakhs. There is also no tax on the interest earned.