What are the Top 5 Tax Saving Investments for 2021

 What are the top 5 tax saving investments for 2021

There’s no denying that 2020 was a financially tough year for many people across the world. The rise of the COVID-19 pandemic had a huge impact on saving and spending trends. Many people came to realise that saving for an uncertain future was vital. Your financial priorities surely have also changed during the economic slowdown the COVID-19 pandemic caused. Let's take a look at how this can affect your tax planning investments for 2021.

• What are some of the non-negotiable options you can look into? 
• Are there any tax-savings methods that you can benefit from, particularly?.

There are several options available to you if you’re considering saving on your taxes in 2021. These savings options are greatly beneficial to your future. Here are five useful ways to save tax with the right investment plans for 2021.

• Life & Health Insurance 

Health & life insurance plans are of paramount importance - they secure your family’s future financial needs in the case of an emergency. A life insurance policy is greatly beneficial for our dependants, especially in the case that you are the sole breadwinner of the family. A life insurance policy will financially secure the future of your family, and enable them to pay off any financial expenses, as well as maintain a decent standard of living. The benefit of having health insurance is that it provides people with much-needed financial backup at times of medical emergencies. As long as your investments for health or life insurance plans are under a total of ₹1.5 lakhs, it is exempt from being taxed, under Section 10(10D) of the Income Tax Act.

• Saving for Retirement

Health & life insurance plans are of paramount importance - they secure your family’s future financial needs in the case of an emergency. A life insurance policy is greatly beneficial for our dependants, especially in the case that you are the sole breadwinner of the family. A life insurance policy will financially secure the future of your family, and enable them to pay off any financial expenses, as well as maintain a decent standard of living. The benefit of having health insurance is that it provides people with much-needed financial backup at times of medical emergencies. As long as your investments for health or life insurance plans are under a total of ₹1.5 lakhs, it is exempt from being taxed, under Section 10(10D) of the Income Tax Act.

• Saving for Retirement

Among the plethora of tax-saving products in the market, a key way to financially secure your future is to use savings plans such as the National Pension Scheme (NPS) or the Public Provident Fund (PPF). Using these tax-saving tools will give you peace of mind for any of your future financial needs. NPS and PPF encourage you to save so that you can access a regular pension in your retirement years. The Public Provident Fund allows you to only invest up to ₹1.5 lakh in one financial year. You can make this payment in 12 instalments or less. This risk-free investment option has a lock-in period of 15 years & also generates a high-interest rate at the end of its tenure.

• Mutual Funds and Equity-Linked Saving Schemes (ELSS)

Mutual funds are a fairly popular choice used to save taxes. Depending on your financial goal, you can choose from a range of tools that best suits you. Another alternative investment option is Equity-Linked Savings Schemes (ELSS). ELSS has similar advantages to that of mutual funds but with the added advantage of being a tax-saving option. The standout feature of this choice is that it has the shortest lock-in period of 3 years. An investment of up to ₹1.5 lakh in one financial year can be claimed as tax-deductible under Section 80C of the Income Tax Act.

• Tax-saving Fixed Deposits

ULIPs or United Linked Insurance Plans have been noted to be the best investment options in India. It offers you the dual benefit of acting as an investment as well as an insurance plan. For a ULIP, an insurance company invests part of the premium in shares or bonds & the balance amount is utilized as an insurance cover. This segregation of the premium is handled by a fund manager employed by the insurance companies. Under Section 80C of the Income Tax Act, investing in ULIPs can help you save a substantial amount when you are filing your taxes. ULIPs come with a lock-of of a five year period, so it would be advisable to plan before investing in ULIPs.

• National Savings Certificate (NSC)

As far as fixed income tax savings go, the National Savings Certificate is a reliable savings scheme that is spearheaded by the government itself. You can open an NSC at any post office. This savings tool is designed to encourage mid-income folk to invest and is similar to Fixed Deposits or even the PPF. The NSC is a low-risk tax saving investment option. If you opt for an NSC, you can avail a tax deduction of up to ₹1.5 lakhs under Section 80C of the Income Tax Act.

Others Deductions : Declaring home or education loans are also two other ways by which you can be eligible for tax deductions. They are eligible for tax deductions under Section 80C of the Income Tax Act.