Ways to save tax and create wealth
As it gets closer to the end of the financial year, all of us begin looking for avenues to limit our yearly tax outflows and save tax. Finding optimal ways to save tax and minimise the tax outflow is a dream come true for many, and today we will look at ways to ensure this . Along the way, these options will also help you save up and secure a nest egg for your retirement phase, ensuring that you can be independent and financially well-off even after your working days are over.
Some of the most popular ways of to save tax, while generating and accumulating wealth are:
- Investing in provident funds: With pension, a distant reality in the private sector, and many government posts also cancelling the provision, it is up to you to create an ample retirement fund during the course of your tenure. The Employee Provident Fund and Public Provident fund are two avenues which offer tax-saving features while helping you to prepare for an independent retirement scenario. In an EPF scheme you can get a certain percentage of your income deducted every month and invested in the scheme. Correspondingly, your employer matches your contribution, subject to a maximum limit of 12% of your salary. On this combined contribution, you earn a fixed rate of interest, as determined by the government from time to time. Currently, the rate of interest on EPF is 8.5%. In addition, both the accumulated corpus, and the interest earned, can be withdrawn tax-free, after discontinuing your job. Under PPF, you are allowed to invest a maximum of INR. 1.5 lakh , each year, and both the accumulated funds and accompanying interest can then be withdrawn tax-free, at the end of the tenure.
- National Pension Scheme and National Saving Certificates: A popular avenue to prepare for retirement while saving on tax is the NPS, which falls under the central government and offers safe returns over the long term. Your allocation to the NPS is valid for tax benefits as per Income Tax Section 80C, in addition to extra deductions ranging up to 50,000 rupees under 80CCD(1b) of the act. Another nationalised option is the NSC, wherein you have fixed deposit services offered by the Post Office. While the NSC offers slightly less interest than bank FDs, your money would be absolutely safe and you can enjoy tax-saving opportunities under Section 80C.
- Tax-saving FDs: We have all heard of how fixed deposits can be a safe way to save money and earn interest, but did you know that you can enjoy tax-saving benefits under Section 80C? Just park your savings for 5 years and see your funds grow while saving on tax outflows.
- Equity-linked Tax-Saving Scheme: If you are looking for tax exempt avenues for short-term savings, ELSS is your best friend as the instrument only requires a lock-in of three years, which is much lower than other comparable options. Add to it the fact that ELSS offers you the ability to invest in equities, and you are all set to partake in the growth of your country’s economy and industries. Further, you can start with an investment of just 500 rupees, meaning you won’t have to burn a hole in your pocket while beginning the journey.
- Infrastructure bonds: Approved by the Government of India, these bonds are issued by infrastructure companies and offer you a risk-free tax-saving option with stable returns. As per Section 80C of the Income Tax Act, you can claim deductions on an investment of up to 20,000 rupees through this route.
It is important to note that while several instruments are eligible for deduction under section 80C of the Income Tax, the combined deduction allowed under this section is INR. 1,50,000. While the primary goal may be to save tax, these instruments can offer you the added benefit of bolstering your savings, so choose wisely and start investing right away!
Ways to save tax while securing your future sounds better. “Tax saving ways which add to your wealth”, or may be “Tax savings ways that will make you wealthy”
If it delete this, your comment gets deleted as well. I have been specifically asked to not remove your comments – Thus, leaving it here.
seems incorrect, the sentence is not making sense. It should be “Finding ways to get exemptions in the income tax returns is a dream come true, and today we will look at ways to ensure this.
It should be tax-saving. Edit it in all paras
It should be “INR 1.5 lakh or Rs 1.5 lakh” the currency should come first. Edit it everywhere accordingly. or use the rupee symbol
Just, make J capital
Section 80C, C is always upper case. Do at other places accordingly.
You might also Like.
Who Are the Best Online Stock Brokers for Beginners 2022?...
Functions of The Best Mobile Trading Apps Mobile trading has...