5 best tax saving instruments for you
Synopsis
Apart from FD, PF and insurance, there are other effective means to save tax. ELSS this has generated good returns in the past and has good potential to repeat the same. Sukanya Samriddhi Scheme is for parents of girl child under 10 years of age.
Income tax is complicated, and you need to have a solid plan to ensure that you make some saving while filing your income tax returns. For the financial year of 2016-17, you need tax planning and here are 5 best instruments to save some during these tough times.
Fixed deposit and insurance are the most common instruments to save tax and it is because they are easy to avail. Apart from these two, there are more options which are easy to avail and suitable for saving taxes.
ELSS funds: Since the launch of e-KYC facility investing in ELSS funds has become easier and the process does not take much time. In the past, this has generated good returns for the investors and has good potential to repeat its success.
The best three ELSS funds to invest are Axis Long Term Equity Fund, Birla Sun Life Tax Relief 96, and DSPBR Tax Saver Fund. Under section 80C of IT act, you can use these to build wealth and save tax.
NPS: National Pension System (NPS) option is good unless you don't mind saving funds for retirement. It was only last year's budget that NPS received a huge boost for tax saving.
If you have exhausted section 80C limit, then NPS under Section 80CCD(1B) is an excellent way to save tax.
ULIPs: Unit Linked Insurance Plan or ULIPs is short form has turned out to be a good tax saving instrument in the recent past. The low cost of ULIPs has made it a safe place to ensure tax saving for the investors. Also, this is a great tool for asset allocation.
VPF AND PPF: Provident Fund is an effective way to save tax for salaries employees. Apart from the PF attached to your salary, you can avail Voluntary Provident Fund (VPF) that has same tax benefits as PF.
If you are not covered by the PF, then Public Provident Fund (PPF) is the best option available for you.
Sukanya Samriddhi Scheme: If you are a parent of a girl child under 10, then this scheme is for you. It provides higher interest rates as well as other benefits of PPF. However, it has withdrawal restriction and money gets locked in for a longer period of time.
There are also few other options including Senior Citizens’ Saving Scheme, NSCs, FDs, pension plan and of course, Insurance that offers good tax saving.
This list has been prepared by on tax saving instruments and parameters to rank them is based on safety, returns, liquidity, flexibility, costs, ease of investment, transparency, and taxability of income.