When investing, every individual wishes to invest more and more, so that they can create wealth for themselves or for future plans or goals. However, if one also has to pay more taxes as their income increases, they will not be able to invest more. Therefore, to overcome this situation, it is necessary to invest smartly, and properly utilize the deductions being offered to taxable income.
Some of the most popular and common tax saving instruments are:
FD
Fixed deposits, or FDs are a method of investment which allows one to save on taxes. Not all FDs are tax saving. So, when choosing to invest through fixed deposits, if one choosesthe tax saving FDs they can have up to Rs. 1,50,000 deducted from their taxable income. Since the lock-in period is only 5 years, they can use this amount after 5 years while also earning through its interest. Even though this interest is taxable, it is a significantly low amount compared to the invested amount.
PPF
Public provident scheme or PPF is another long-term savings and investment option, which allows deduction of up to Rs. 1,50,000 in a financial year. Al one needs to do is open a PPF account and invest the money and earn in the form of interest.
Life Insurance
Life insurance cover offers financial security to a person’s family after their death. Up to Rs 1,50,000 can be deducted from taxable income for premiums paid for insurance policy. Additionally, the proceeds offered on death are completely free of taxes.
However, to prevent fraudulent practices, if a policy is terminated within 5 years, then all the deducted amount will be added to the current income calculation and taxed accordingly.
If you want to know more about other investment methods which allow you to save taxes,contact experts at Arthavidhi today.
