4 Tax Saving Investment Options With 5 Year Lock-In Period

Who doesn't want to save tax! Tax planning and investing in tax saving investment instruments is key destination for tax savvy. However, when it comes to saving, everyone has different preference. The type of savings instrument a person chooses is determined by the quantity of money that may be saved, the time horizon, the reason for saving, and other factors. Under Income Tax Act, 1961, the an investor can save tax on his or her investment. Further, under section 80C of the act, taxpayer can save a significant amount of tax in a financial year. In this article, we are exploring 4 tax saving investment destinations that an investor can use for investment over 5 year of lock-in period.

Section 80C

Section 80C of the Income Tax Act, which comprises numerous investments and expenses you can benefits over time on - up to a maximum of Rs. 1.5 lakh in a financial year - is the most widespread tax-saving option accessible to individuals and HUFs in India. Section 80C requires a mixture of activities, including sections 80CCC and 80CCD. You can claim the amount as a tax benefit from your taxable amount for the past fiscal year if you want to use your income in some of these activities during the past fiscal year.

5 Year Bank Fixed Deposit

Fixed deposit (FD) have long been a popular way to save money since they are not subject to market fluctuations and offer a fixed interest rate at maturity. Banks and other financial organisations provide FDs as an investment option. Investors would deposit a big payment over a period of time into this account. In exchange, customers would get a fixed rate of interest for the period of the investment. The interest rate on FDs is substantially greater than the interest rate on a standard savings account. 5 year lock-in period FD are best option for saving tax under section 80C. Before investing in FDs provided by an NBFC or HFC check the ratings of the financial institution issued by organisations such as CRISIL.

National Saving Certificate (NSC)

The NSC is a tax-tax investment endorsed by the government that aims to promote small and medium-sized savings. The NSC scheme is supported by the Indian government and is available at all Post Offices. The risk is believed to be quite minimal because the scheme is sponsored by the Indian government. The plan is solely for Indian nationals and does not apply to NRIs or HUFs. The interest on the scheme is compounded annually and credited when the certificate matures. The returns gets re-invested in the scheme automatically, thanks to interest compounding. As a result a deduction of up to Rs 1.5 lakh is permitted.

Unit-Linked Insurance Plan (ULIP)

A ULIP is a multi-purpose and mix of both insurance coverage as well as investing exposure in bonds scheme or stocks. It is one of most preferred investment option among tax savvies. This product needs policyholders to pay premiums on a regular basis. Part of the premiums is used to cover insurance costs, while the rest is pooled with funds from other policyholders and invested in stocks, bonds, or a combination of both. ULIP premiums are eligible for a deduction up to a maximum of Rs 1.5 lakh per financial year under Section 80C of Indian Income Tax Act, 1961. Furthermore, under Section 10 (10D) the amount you get at maturity is exempted from tax burden.

Senior Citizen Saving Scheme (SCSS)

This Post Office saving plan offers excellent returns with little risk to anyone over the age of 60. This plan is available at the Post Office and select banks. On the date of starting a SCSS account, the subscriber must be at least 60 years old. Age relaxation can, however, be granted to select groups of people. Senior adults can earn quarterly interest on savings up to Rs 15 lakh with the SCSS account. Investments made in the SCSS account are tax deductible under Section 80C of the Income Tax Act. According to the official Post Office website, if the total interest in all SCSS is greater than Rs 50,000 in a financial year, the interest is taxed.