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Best Tax Saving Investments in 2022 in India

Investments that give tax savings under Sections 80C and 80CCC of the Income Tax Act of India are essential for financial planning and growth since they serve as a safety net for unforeseen costs and emergencies. Let us learn about best Tax saving investments.

Tax is one such crucial aspect that can make or break your total generated income from investments. If the return on investment gets heavily taxed, then the scope of generating wealth over the long term gets lessened. Thankfully, there are various investments that offer considerable tax benefits and help you get better returns.

In this article, we will be looking at some of the best tax-saving investment options that you can opt to save considerable tax deduction on returns and provide you with a good return on investment.

Best Tax Saving Investments

The following list exhibits some of the best tax-saving investment plans for 2022 that investors can choose to invest in to maximize tax benefits. 

Investment Name Deduction under section Total tax deduction up to (in Rs.)
Life InsuranceSection 80C (Premium) & Section 10(D) (Death/Maturity)150000
Health InsuranceSection 80D55,000
ULIPs80CCC150000
New Pension Scheme (NPS)Section 80CCE/ section 80CCD (1B)150000Additional 50,000
Equity-linked Tax Saving Scheme (ELSS)Section 80C150000
Public Provident Fund (PPF)Section 80C150000
National Saving Certificates (NSC)Section 80C150000
Infrastructure BondsSection 80CCF20000
Senior Citizen Savings schemeSection 80C150000
Fixed DepositSection 80C150000

Tax saving investment options under various sections:

Fixed Deposit

  • Investors can save tax from tax saver fixed deposit schemes under section 80C of the Indian Income Tax Act. It allows the investors to claim a tax deduction of up to a maximum of Rs 1.5 lakh. These fixed deposits come with a lock-in period of 5 years and offer an interest in the range of 6.5-7.5%. The interest from the scheme can be earned either monthly or quarterly and reinvested. The interest generated from the FDs is taxable. Investors below 60 years can avoid TDS deduction by filling out Form 15G and 15H in the case of senior citizens.

Public provident fund (PPF)

  • It is one of the popular tax-saving investment vehicles among self-employed professionals and risk-averse investors. PPF is a long-term saving scheme that comes with a lock-in period of 15 years. As per the new budgeting rules, the tax deduction amount is increased to Rs 1.5 lakh from Rs 1 lakh under section 80C. Investors can start investing in PPF by opening a PPF in a bank or post office branch. The investment can be made from Rs 500 to Rs 1 lakh through instalments or lump sums, depending on the investor's wish. 

ULIPs (Unit Linked Insurance Plans)

  • Investors looking for a long-term investment horizon can choose ULIP as a tax saver option. In ULIP plans, the premiums are invested in the debt and equity market and offer you tax-free returns under 80C and 10(10D) of the Income Tax Act while insuring your investments. With these plans, you have the flexibility to switch the funds spent on your goals. ULIPs tend to perform better over a long period, say 10-12 years.

National Saving Certificates (NSC)

  • It is basically a bond scheme that offers tax benefits to small to mid-income investors under Section 80C. Investors having savings accounts in a bank or post office can buy NSC online through internet banking. NSC can be purchased for self, on behalf of a minor or adult as a joint account. These certificates have a lock-in period of 5-10 years, and inventors cannot prematurely withdraw from them. The more investors stay invested in NSC, the more they can claim tax deductions as an interest ensued every year in the scheme.

Senior Citizen Savings Scheme

  • It is a government-sponsored saving scheme for individuals above 60 years. This scheme enables the investors to secure post-retirement income through substantial returns. The principal amount in the scheme account is eligible for a tax reduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act of the existing tax regime. However, the interest earned from the scheme gets taxed as per the investor's tax slab. 

Life insurance

  • Every income-tax payer prefers this policy to secure their & their family's future and get tax exemption. Life insurance policies offer tax benefits of up to Rs 1.5 lakh under section 80C. In case of the insured's death, a lump sum is offered to the beneficiary and exempted under section 10(10D).

New pension scheme (NPS)

  • Individuals concerned about their retirement can select a new pension scheme to enjoy the tax benefits. NPS is low-cost and flexible. You can start with the scheme with a minimum of Rs 6000 as an installment or as a lump sum. You can decide how you want to allocate your money. You choose gilts, corporate bonds, and equity, depending on your preference. The scheme offers tax deductions of up to Rs 1.5 lakh under section 80CCE/ section 80CCD (1B).

Health Insurance

  • These plans offer a tax deduction on premiums under section 80D. Health insurance premiums up to Rs 25,000 are subject to tax deductions, and for senior citizens, it is Rs 30,000. If you purchase a health insurance plan, you can enjoy tax deductions up to Rs 35,000. The lump sum received in case of disability will not be taxed.

Equity-linked Tax Saving Scheme (ELSS)

  • Investors wishing to invest in short-term plans of a lock-in period of three years can invest in an equity tax saving scheme. This scheme can generate superior returns with a minimum investment amount of Rs 500. Once the lock-in period, the investor can discontinue their investment in the ELSS scheme.

Infrastructure bonds

  • If you are an investor who falls in the fixed income category and wants to invest in risk-free tax-saving instruments, you can choose infrastructure bonds. Infrastructure bonds have the approval of the government of India. These bonds get issued by companies under the infrastructure category, such as LIC and L&T. With infrastructure bonds, investors get a modest interest rate with tax benefits. An investment of up to Rs 20,000 can be made in infrastructure bonds and used for an income tax deduction under Section 80C. Minors who are Indian residents and Hindu Undivided Families also invest in infrastructure bonds.

Conclusion:

When it comes to investment, it's essential to employ a smart investing approach, so your hard-earned money doesn't get consumed during taxation. The above are the top tax-saving investment options for investors of varying ages, requirements, and financial abilities. Investors can choose any other above tax-saving investments depending upon their needs and financial situation. However, you must carefully plan your savings not just for tax exemption, but also to ensure a better and stable financial future.

When choosing the right tax-saving investment plans, consider the factors such as safety, returns, and liquidity. Also, get a proper understanding of how the returns are taxed. The ideal time to start investments is in the early quarters of the financial year so get sufficient time to plan and avail maximum return on investments from various tax-saving investments. 

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