The primary goal while investing your money is to grow the corpus and generate wealth. With a proper plan, investments can accomplish long-term as well as short-term goals. Another goal on the minds of investors is to ensure the highest amount of tax savings possible. 

 

As a result, while deciding on the pros and cons of investing in a particular instrument, investors often also weigh how much tax savings it can help achieve. Tax planning has become an integral part of investing.

Tax-saving Options in India

Numerous investment instruments offer steady returns and tax-saving benefits simultaneously. Find out how to save tax in India with the help of the following avenues: 

Investment Option

Details 

Deductions

Tax Benefits Under ITA

Equity-linked Savings Scheme (ELSS)

ELSS, an open-ended mutual fund with 80% equity allocation, offers high returns, suited for investors with high risk tolerance

Claim deductions of up to ₹1.5 Lakhs per financial year  

Section 80C

Public Provident Fund (PPF)

PPF provides premier tax-saving benefits with government-backed guaranteed returns

Investments qualify for tax deductions of up to ₹1.5 Lakhs per fiscal

Section 80C

Tax-saver Fixed Deposit (FD)

Ideal for risk-averse investors, tax-saver FDs provide assured returns with a lock-in period of 5 years

Claim a maximum deduction of ₹1.5 Lakhs every financial year

Section 80C

Life Insurance Policies

Life insurance policies provide financial protection by paying out a lump sum upon the policyholder's death, in exchange for paid premiums

Premiums paid qualify for a deduction up to ₹1.5 Lakhs; income on maturity is tax-free if the premium is not more than 10% of the sum assured

Section 80C and 80D

National Pension Scheme (NPS)

NPS is a government-backed retirement savings scheme offering market-linked returns and tax benefits for pension contributions

Claim deductions of up to ₹1.5 Lakhs; additional deduction of up to ₹50,000 permitted for investments in Tier I accounts 

Section 80C and 80CCD (1B) 

There are definitely several options open for investors who are looking to invest in tax-saving investments that allow for significant tax savings. In fact, learning how to save tax on salary earnings is crucial for anyone looking to build wealth realistically. Here, the best-term insurance policies not only allow investors to ensure the well-being of their dependents but also provide tax benefits for the present. 

FAQs on How to Save Tax

How can I save tax on my annual salary of ₹9 Lakhs?

Learning how to save tax on ₹9 Lakhs salary does require proper planning. First, you must assess your risk appetite and investment preferences and choose the suitable investment option. These include ULIP, FDs, PPF, NPS, NSC, mutual funds, etc. Based on your contributions, you can then enjoy deductions on your taxes.  

How can I increase my tax savings?

The first step to learning how to save income tax is to understand and try to get tax deductions. You can claim deductions and exemptions such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA), along with the deductions under various sections of the Income Tax Act.

What is HRA exemption?

Salaried individuals receiving HRA can claim exemption to reduce taxable income partly or fully if they pay rent.

What are some tax-free investment options?

There are various tax-free investments that you can consider, such as ULIPs, pension plans, NPS, PPF, etc.

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