Alternative Tax Savings for Indian Citizens – Know All | PayBima

What Are Some of the Best Ways to Save Taxes?

Are you thinking about other ways to manage your money to reduce your taxes? If so, this article may be helpful in providing good advice ways to get money to save tax.

When we say ‘tax saving money’, it means people don’t have to pay taxes. Now, mainly three types of funds allow tax exemption on their transactions. But all money goes through three different forms such as; the early loan, the interest earned, and the amount paid at maturity.

Now, if the income is receiving EEE exemption or triple exemption, it means that you can get taxes on all the three types mentioned above. On the other hand, EET funds can exempt you from taxes on the first two activities mentioned above, while ETT funds will allow your income to be exempt from the above mentioned activities.

5 Best Ways to Save Money on Taxes?

Based on the details above, there are many ways to save tax that are tax deductible as explained on the page below.

1. NPS or National Pension Scheme

This is a savings plan designed for people who are ready to save their money for retirement. Known as one of the best pension plans in India, NPS is a profitable investment that also allows tax benefits. This scheme is suitable for people in various professions and the self-employed.

The most beneficial thing about NPS is that it allows additional tax deduction up to INR 50,000. So, when you buy National Pension Scheme, you can save more than INR 2 lakh in your annual income. However, the disadvantage of NPS is that the scheme has a long lock-in period during which you cannot withdraw money. Since NPS is given to retirees, it allows withdrawal only after the age of 60 years.

Growth is also tax-deductible if you choose to convert 40 percent of that amount into an annuity. The remaining 60 percent of the amount can be deducted as income and this amount is not subject to tax. Therefore, NPS works as a tax saving investment under section 80c of income tax.

2. PPF or Public Provident Fund

If you are looking for a long-term savings plan, PPF is another good option. The combined debt market returns combined with the triple tax deduction make this plan popular, especially if you’re looking for long-term goals. PPF is an investment plan for 15 years. However, it allows the insured to withdraw a small amount after 5 years.

The limitation with PPF is that it allows one to deposit INR 1.5 lakh as the maximum amount that can be invested in one financial year. So, regardless of the number of PPF accounts you have in the names of different individuals, you can deposit as much as INR 1.5 lakh in one financial year.

3. Guaranteed Savings Plans

When it comes to the best tax saving deals, you can’t skip the fixed deposit plan offered by life insurance providers. Similar to ULIPs in terms of tax exemption, these plans offer tax benefits of higher maturity if the annual premium is below 10% of your sum insured. So, if you have premiums up to INR 1.5 lakh, it gives you a tax deduction.

However, when it comes to guaranteed savings you won’t get much money. Instead it allows for a small return on fixed assets along with providing life insurance. So, if you have financial goals that require you to make a guaranteed investment, this plan meets your goal.

4. ULIP or Unit Linked Insurance Plans

ULIPs are plans that deserve to be mentioned as one of the best tax saving plans. Here are the reasons for that:

  • ULIPs allow a choice of multiple investments including liquid securities and investments that are risk-adjusted to growth.
  • They allow investors to switch between currencies. Therefore, you can switch from risk money to safe money at any time.
  • They also protect your goal by offering premium security options. Therefore, if you die early, the system is protected.

ULIPs come with a longer investment period. They are simple plans that are easy to manage. All you need is to plan your investment strategy according to the level of risk you want to take at the beginning of the process. And just like you do, ULIP will manage your account and ensure the safety of your returns on maturity.

5. ELSS or Equity Linked Savings Scheme

If you want to invest in mutual funds or equity funds, you can buy ELSS plan, which is the most popular tax saving scheme in India. This is a mutual fund strategy that is managed randomly with equity funds. It has a lock in period of 36 months, which applies to every deposit made in your account individually. Therefore, you cannot move your ELSS funds to other assets before completing the lock-in period of 36 months. After the lock-in period, you can sell your share of shares and transfer your money to another safe form.

Read More: Tax Savings That Can Be Done Online to Save Time.

The end

Properly planned taxes allow people to keep more of their income. If you want to plan your money carefully, you should start by reading the plans you want to buy. As long as you are well aware of the process and its advantages, you can enjoy the fruits of the investment.

Also, patience is another important aspect that you should have before investing. You must understand that no financial decision taken hastily can have profitable results.

So, if you are thinking about where to save money to save tax, now you know the best ways to save your money to save tax.
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