An investment is an instrument that provides you market-linked appreciation. It is a monetary asset that will provide you with income in the future, or you can sell it at a higher price for a profit. Whereas, a smart investment plan is something that will not only provide you market-linked returns but also added tax benefits.
There are various tax-saving investment plans in the market, which can confuse you, and you don’t want to invest your hard-earned money on something that is not suitable for you. So, here is the list of best investment plans available in the market that provides tax benefits:
ELSS (Equity-Linked Saving Scheme) Mutual Funds
ELSS is popular among other types of mutual funds. Your money will be invested in equities, and Equity-linked saving scheme comes with the lock-in period of 3 years. ELSS offers 12-15% of returns with added tax benefits. The minimum amount that you can start your investment with can be as low as Rs 500/-.
The returns on ELSS funds are taxable under LTCG or Long Term Capital Gains Tax at 10% if your gains are Rs 1,00,000/- in a financial year. If your funds pay dividends, then they are subject to DDT or Dividend Distribution Tax also, at 10%.
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Unit Linked Insurance Plans (ULIPs)
Unit Linked Insurance Plans are the insurance-cum-investment plan that offers the dual benefit of investment and traditional life insurance cover. You can get insurance cover along with returns and that why it is growing popularity among people. ULIPs come with the lock-in period of 5 years. A part of the premium paid by you is invested in stocks and equities (depending on your risk appetite), and another part provides you insurance cover. All forms of ULIPs are eligible for tax benefits except single premium ULIPs.
The premium paid in ULIPs plans is tax-exempt up to Rs. 1.5 lakhs, under Section 80C, while the returns on investment are also tax-free under Section 10 (10D).
Buy ULIPs plan from reputable insurers such as Max Life Insurance to enjoy the dual benefit of investment and insurance.
Health insurance will not only take care of your hospitalization bills and medical expenses but can also work as a tax-saving investment. The premium paid towards health insurance provides tax benefit under section 80D of the Income Tax Act,1961.
Buying health insurance will take care of future eventualities and will help you reduce financial burdens in the time of need. Buy health insurance plans that look after your medical expenses and provides timely tax benefits.
Public Provident Fund or PPF
Public Provident Fund or PPF is a savings instrument that is created by the Government of India. It provides fixed returns along with tax benefits under section 80C. You can open your PPF account through any nearby post offices and in most of the major banks. They come with a lock-in period of 15 years.
PPF’s interest rate is reviewed by the government every quarter, but currently, it is fixed at 7.9% for 2019-20. Public Provident Fund investments come under (EEE) or Exempt-Exempt-Exempt category, which means that apart from the principal investment, maturity and interest value is also tax-free.
You can start your PPF account with a minimum contribution of Rs 500 and a maximum of Rs 1.5 lakh in a financial year.
Term Life Insurance
Term insurance is the pure type of life insurance that not only provides financial support to your family in the time of crisis and help them achieve their goals, but it also provides tax benefits. Under Section 80C and 10(10D) of the Income Tax Act; term insurance offers Tax exemption.
Be a smart investor and put your hard-earned money in a smart investment plan that offers tax benefits.