While the idea of tax-saving instruments might not be thrilling, the reality is that employing a savvy tax-saving strategy can significantly enhance your financial standing.
By exploring these 7 clever NIFTY instruments, you can effectively reduce your tax burden and increase your available funds, offering more financial freedom to pursue your dreams:
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1. Equity Linked Savings Schemes (ELSS):
Think of these as stock market superheroes, but with a safety net. You invest in stocks while claiming tax deductions of up to ₹1.5 lakh on your premium.
| Tax exemption: | Estimated returns: | Lock-in period: |
| Entire profit (capital gains) after one year is tax-free. | Varies depending on market performance, but historically higher than other tax-saving options. | 3 years. |
2. Public Provident Fund (PPF):
This long-term champion locks in your money for 15 years, but rewards you with handsome interest and tax benefits. Invest up to ₹1.5 lakh a year and enjoy tax deductions, tax-free interest accrual, and a tax-free lump sum at maturity.
| Tax exemption: | Estimated returns: | Lock-in period: |
| Full exemption on investment, interest, and maturity amount. | Around 7-8%, compounded annually. | 15 years. |
3. National Pension Scheme (NPS):
Think of this as building a retirement superhero costume – invest up to ₹1.5 lakh a year and claim tax deductions. Choose your own investment mix and watch your nest egg grow.
| Tax exemption: | Estimated returns: | Lock-in period: |
| Full exemption on investment, interest, and up to 40% of maturity amount. | Depends on chosen investment option, but historically around 10%. | Until 60 years old. |
4. Unit Linked Insurance Plans (ULIPs):
These combine insurance coverage with investments, like a two-in-one superhero power. Claim tax deductions on premiums (up to ₹1.5 lakh) and enjoy market-linked returns. Choose your risk appetite and investment options carefully.
| Tax exemption: | Estimated returns: | Lock-in period: |
| Partial exemption on maturity amount. | Depends on chosen investment option and market performance. | Varies depending on the plan |
5. Senior Citizen Savings Scheme (SCSS):
If you're a grey-haired hero (over 60 years old), this one's for you. Enjoy guaranteed, high-interest returns (currently around 7.4%) for 5 years with tax deductions on investments up to ₹1.5 lakh.
| Tax exemption: | Estimated returns: | Lock-in period: |
| Interest income is taxable, but investment amount is deductible up to ₹1.5 lakh. | Guaranteed 7.4% per annum. | 5 years. |
6. National Savings Certificates (NSC):
This reliable option offers fixed interest for 5 or 10 years, making it a safe haven for your savings. Get tax deductions on investments up to ₹1.5 lakh and enjoy guaranteed returns even if the market goes haywire.
| Tax exemption: | Estimated returns: | Lock-in period: |
| Interest income is taxable, but investment amount is deductible up to ₹1.5 lakh. | Varies depending on the tenure (currently around 6.8% for 5 years and 7.6% for 10 years). | 5 or 10 years. |
7. Tax-free Bonds:
Like a taxshield for your investments, these government-backed bonds offer fixed interest income that's completely tax-free! Invest up to ₹2 lakh and watch your money grow without worrying about the taxman.
| Tax exemption: | Estimated returns: | Lock-in period: |
| Completely tax-free on both interest and maturity amount. | Varies depending on the bond series, but typically around 6-7%. | Varies depending on the bond series. |
Conclusion:
Remember, these are just some of the tax-saving tools in your arsenal. Do your research, choose the ones that suit your risk appetite and financial goals, and watch your taxes shrink while your savings soar!
