Three Tax Saving Investments Options in India
If you are an ardent investor, you must be aware of Warren Buffet and his intensive knowledge on the market. Even if you are not an experienced investor, Buffet is a common name most people know of. One of his most popular saying is “Do not put all your eggs in one basket”.
Adhering to your investment portfolios, it is important to maintain a diversified basket. Have a mix of balanced, conservative, and aggressive funds. You can also add in government backed investments. However, one common mistake most people make is keeping their money in a savings account. This may seem like it, but it is not one of the most conducive corpus building avenues. You will be sitting on an idle savings account earning 3.5% interest.
With each investment avenue, the benefits of tax savings can seem very alluring. Hence, many people often flock to such options which offer tax savings. Tax saving in India is a big concern among the public. Hence, around the period close to financial year.
The sole motive of all such efforts is to earn profit and earn tax benefits. From that perspective, there are a plethora of options in the investment market that will allow you to make profit by putting aside your money in the short term. Here are three such tax savings schemes in India:
1. ELSS – Equity Linked Savings Schemes – This is a type of diversified mutual funds investment. It aims at investing in equity markets and offers tax benefits under Section 80C. The benefit of such investments is that the lock-in period of three years. Thus, from a short-term tax-savings perspective this is a strong option. What is better is, such investments also offer market-linked capital appreciation and the capital gains are tax-free.
2. Health Insurance – This may seem like an odd addition to this list. But it is important to note that much like other conventional investment avenues, health insurance is also an important investment. It is a safety net that protects you as well as your loved ones from unexpected costs that may arise out of medical emergencies. With facilities like cashless hospitalization it will also protect you from medical expenses related to hospitals. Subject to certain terms, all the premiums paid towards health insurance are exempt from taxes. Health insurance offers a deduction upto Rs 30,000 for senior citizens and Rs 25,000 for others.
3. Debt Fund Investment – Debt based mutual funds in India are a popular avenue for tax saving in India. This primarily invests in money market instruments such as corporate bonds, treasury bills and government securities. They are known to provide fixed returns and hence are an attractive source of investments. As an ideal short term investment, debt funds are known to provide 7-8% returns after tax. If you are a risk averse investor, these funds are preferred over bank fixed deposits. However, the most attractive part of debt funds is that the dividends earned from these funds are tax-free.