We spend first quarter of the year\ntrying to understand ways to save taxes. Most financial advisors with a\nforward-looking mind-set, would advise you to map tax-minimizing options while\nmaximizing your investment options. In this blog, we share how to ear invest\nyour money in the right tax saving options, so that your money helps you earn\nmore money, thereby lowering your tax burden<\/p>\n\n\n\n
Here are 5 smart tax saving options for\nyou to invest in: <\/p>\n\n\n\n
Equity-linked Savings\nSchemes (ELSS)<\/strong><\/p>\n\n\n\n This financial instrument allows you to\ninvest in diversified mutual funds with a tax benefit under Section 80C of the\nIncome Tax Act. You can avail a benefit by investing up to Rs. 1.5 lakhs.\nHowever, the scheme also comes with a minimum lock-in period of 3 years. One\nimportant thing to remember is that the dividend to the investor is not on the\nbasis of company profits but is rather based on the NAV (Net Asset Value). It\nis estimated by dividing all the assets and removing all the liabilities. <\/p>\n\n\n\n One word of caution, starting last\nfinancial year, you will have to pay 10% tax on dividends earned through Mutual\nfunds, which are known as dividend distribution tax on earnings. Although,\nthere are no assured returns, generally the rule of thumb is that if you invest\nin long-term mutual funds, you do end up making profits. <\/p>\n\n\n\n Public Provident Fund<\/strong><\/p>\n\n\n\n PPF or Public Provident Fund has been a\nsafe bet for plenty of financial investors ever since it was introduced fifty\nyears ago in 1968. What makes it so reliable is the fact you get assured\nreturns on the principal as well that interest amount. PPF offers 8 percent\ninterest per annum, which gets revised every 3 months. There is a lock-in\nperiod of 15 years, which means you can expect good long-term investment\nreturns. <\/p>\n\n\n\n Another positive aspect of PPF is that,\nyou can open your account by depositing a minimum amount ofRs.500 to a maximum\ncap of Rs. 1.5 lakhs a year. You can open your account easily by visiting your\nnearest post office or bank branch. These days a few banks are even offering\nPPF online. It\u2019s perfect for long-term players who want to invest and forget\nabout the constant volatility of the equity markets. Though, we\u2019d recommend a small\nchunk in the equity market for higher returns and investments. <\/p>\n\n\n\n Employees Provident\nFund <\/strong><\/p>\n\n\n\n With a large chunk of the workforce\nbeing salaried in India, this is a perfect investment option for all employees.\nHow does it work? Basically, 12 per cent of the employee\u2019s salary is deducted\nevery month for an EPF account, which is equally shared by the employer. At the\nend of the employment term, the employee can withdraw this amount with interest\nby intimating the employer.<\/p>\n\n\n\n As an employee, you can enjoy a tax\nbenefit of up to Rs. 1.5 lakhs per year. The latest interest rate on EPF\namounts to 8.55% for the financial year 2017-18. There is another type of\ninvestment option called VPF, which is the Voluntary Provident Fund, wherein an\nemployee can increase his own contribution up to 100 percent of the basic\nsalary and Dearness Allowance (DA). <\/p>\n\n\n\n Unit Linked Investment\nPlans <\/strong><\/p>\n\n\n\n While some people prefer savings, others\nfavour investing in insurance for protecting themselves and their loved ones\nfor any contingency, emergency or death in the family. Unit Linked Investment\nOption is a great combination of protection and savings for the future. In a\nULIP plan, a part of your investment is spent in various long-term market\nassets and instruments while the other part is used for insurance. <\/p>\n\n\n\n That\u2019s why the lock-in period for most\nULIP investment plans is usually 5 years or more. The duration for ULIP usually\nlasts 15 to 20 years after which an investor can expect decent returns\ndepending on the growth of the equity market. \n<\/p>\n\n\n\n Word of caution<\/em><\/strong><\/p>\n\n\n\n This type of investment is not\nrecommended for those who are looking strictly at insurance. That\u2019s because it\ninvolves certain market risks linked to equities and other instruments. <\/p>\n\n\n\n