The Income Tax Act offers a variety of tax-saving investment options that not only help reduce tax liabilities but also provide avenues for wealth creation. Here are the top 10 tax-saving investment options for FY 2024-25 to consider for reducing your tax burden while building a strong financial future.
1. PPF
The PPF remains one of the most popular tax-saving instruments. It is a government-backed, low-risk investment scheme with a 15-year lock-in period. The contributions made to the PPF account are eligible for a tax deduction under Section 80C of the Income Tax Act, up to ₹1.5 lakh in a financial year. Additionally, the interest earned and maturity amount are tax-free.
Why Choose PPF?
- Government-backed and secure.
- Tax-free returns.
- Ideal for long-term investors.
2. EPF
The EPF is a retirement savings scheme mandatory for salaried employees in India. Both employee and employer contributions are eligible for tax deductions under Section 80C (up to ₹1.5 lakh). The interest earned and the maturity amount are tax-free when the individual stays employed for more than 5 years.
Why Choose EPF?
- Automatic deductions from salary.
- Tax-free returns on maturity.
- Safe and long-term savings.
3. NPS
Tax Benefit: Additional deduction up to ₹50,000 under Section 80CCD(1B)
The NPS is an excellent option for retirement planning. Contributions made to the NPS are eligible for tax benefits under Section 80C (up to ₹1.5 lakh). You can also claim an additional tax deduction of ₹50,000 under Section 80CCD(1B). The NPS offers a flexible mix of equity, corporate bonds, and government securities.
Why Choose NPS?
- Extra tax benefit of ₹50,000 over the Section 80C limit.
- Excellent for retirement planning.
- Flexibility in investment options.
4. Tax-Saving Fixed Deposits
Tax-saving FDs are offered by banks and financial institutions with a 5-year lock-in period. The principal investment qualifies for tax deductions under Section 80C up to ₹1.5 lakh. However, the interest earned on these deposits is taxable, which makes it less attractive compared to other options in terms of returns.
Why Choose Tax-Saving FDs?
- Low-risk investment.
- Fixed returns.
- Suitable for conservative investors.
5. National Savings Certificate
The NSC with a 5-year lock-in period, it qualifies for tax deductions under Section 80C up to ₹1.5 lakh. The interest earned is taxable, but it offers guaranteed returns.
Why Choose NSC?
- Government-backed, low-risk investment.
- Guaranteed returns.
- Ideal for long-term and secure savings.
6. Unit Linked Insurance Plans
ULIPs combine life insurance with investment. A portion of the premium goes toward life insurance, while the remaining is invested in market-linked funds. The maturity amount is tax-free under Section 10(10D), provided certain conditions are met.
Why Choose ULIPs?
- Life insurance plus investment.
- Tax-free maturity amount.
- Ideal for those seeking market-linked returns.
7. Health Insurance Premiums
Health insurance premiums paid for yourself, your spouse, children, and parents qualify. For individuals below 60 years of age, the deduction is up to ₹25,000. For senior citizens, the deduction limit increases to ₹50,000. Senior citizens who are not covered by health insurance can claim a deduction of ₹50,000 for medical treatment.
Why Choose Health Insurance?
- Covers medical expenses.
- Tax benefits for premiums paid.
- Helps secure health and finances.
8. Sukanya Samriddhi Yojana
The SSY is designed for the parents of a girl child. Both the interest earned and the maturity amount are tax-free.
Why Choose SSY?
- Government-backed and secure.
- Tax-free returns.
- Ideal for parents saving for their daughter’s future.
9. Senior Citizens Savings Scheme
The SCSS offers attractive returns with a 5-year tenure. While contributions qualify for tax deductions under Section 80C, the interest earned is taxable. Senior citizens get higher interest rates.
Why Choose SCSS?
- Higher interest rates for senior citizens.
- Safe and government-backed.
- Tax deduction under Section 80C.
10. Equity-Linked Savings Scheme
ELSS is a type of mutual fund that offers the potential for high returns through equity exposure. The scheme comes with a 3-year lock-in period and qualifies for tax deductions under Section 80C (up to ₹1.5 lakh).
Why Choose ELSS?
- Higher potential for returns due to equity exposure.
- Short lock-in period (3 years).
- Tax deduction under Section 80C.
Contact Us
Get in touch with dnA Consulting now, and let our team of expert Consulting CAs help you craft a tax strategy that maximizes your savings. Whether you’re an individual or a business owner, we have the knowledge and experience to help you make the most of your finances.
For more information, visit our website at www.dnA-consulting.in. Or, give us a call at +918618756195, or email manager@dna-consulting.in and our friendly team will be happy to assist you in getting started with your tax planning.
Start early. Save more.
Let dnA Consulting be your trusted partner in tax planning for FY 2024-25.