Which are the best tax free investments in India?

Written by : Knowledge Centre Team

2024-08-02

940 Views

Locate branch

Resume journey

Pay Premium

Which are the best tax free investments in India?

Whether you are a millennial paying tax for the first time or a regular taxpayer, the approach of tax season always brings with it tax saving season as well. Many of us go helter-skelter looking for investments and instruments to help us in saving tax. In this pursuit, many of us forget that the primary purpose of an investment is investing, not just tax-saving.

Here’s a list of the best tax-free investments in India, which will do a lot more than saving your taxes.

PPF

Public Provident Fund is one of the excellent tax-free investments offered by the government for retirement planning. It is especially useful if you do not have a structured plan for your pension. PPF investments are linked to debt markets, and have a lock-in duration spanning 15 years. You can partially withdraw a sum after 6 years. Proceeds from PPF are exempt from tax for investors.

The maximum yearly investment which is tax-free under PPF is Rs.1.5 lakhs, and tax benefits are available under Sections 80C

NPS

The New Pension Scheme is a scheme from the Pension Funds Regulatory and Development Authority (PFRDA). It is another instrument that helps with retirement planning. The scheme encourages people to invest in a pension account at regular intervals during the course of their employment. After retirement, the subscribers can take out a certain percentage of the corpus. As an NPS account holder, you will receive the remaining amount as a monthly pension post your retirement. If you are in the age-group of 18 to 60 years, you can invest in NPS. It has low charges for fund management and makes for an easy investment. Investments are made in three different asset profiles- equity, corporate bonds, and government securities. It provides a diversified risk investment.

Any individual who is Subscriber of NPS can claim tax benefit under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.5 lac under Sec 80 CCE. An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act. 1961.

SCSS (Senior Citizens Saving Scheme)

This is a tax-saving scheme devised specially for resident senior citizens 60 yrs or over the age of 60 years. You can put in a one-time deposit of minimum Rs.1000 and maximum Rs.15 lakhs. The deposit matures after 5 years from the date of account opening but can be extended once by an additional 3 years. Interest is payable every 3 months, and is subject to TDS. Tax benefits of this scheme can be availed as per Section 80C.

Life insurance

Life insurance, especially term insurance, is a necessity for everyone. It is one of the first financial decisions that you should make once you start earning for yourself. It not only helps you in tax-saving, but also secures your family against eventualities. Life insurance plans provide tax benefits as per Sections 80C and 10(10D) of the Income Tax Act.

Term insurance is a great choice as it provides a large sum assured for a relatively lower premium. And you don’t even have to worry about losing all your premiums with plans like iSelect+ term insurance, which offer a return of premium option.

iSelect+ Term Plan

The iSelect+ Term Plan by Canara HSBC is one of the most comprehensive plans in the market. It offers the exceptional option of return of premium. It also offers flexibility with the option of paying premiums either for a limited period or for the entire policy term. The sum assured can be level, increasing, or even decreasing as per your convenience. In case of death or terminal illness, the entire death benefit is payable to the policyholder.

ULIPs

Unit-Linked Insurance Plans are a unique combination of insurance and investment. These tax-free investments offer a life cover along with a choice of investments as per your risk appetite. Your premiums are divided into both instruments, and you hence do not have to invest in two different instruments. ULIPs follow the EEE or exempt-exempt-exempt rule. It means that they are exempt from taxes on three aspects- investment, interest on investment, and income earned from investment.

Invest 4G

One of the most lucrative ULIPs that you can invest in is Invest 4G from Canara HSBC Life Insurance. It provides a choice of 7 different funds and 4 different portfolio strategies to choose from, along with a life cover. Loyalty Additions and Wealth Boosters only make the deal sweeter for you, and the return of the mortality charge option also ensures that you don’t have to spend a lot.

Conclusion: Saving tax is essential, but make sure that your investment decisions are not guided by one motive alone. You should not regret putting your money in them later as it is for the long haul.

What is Wealth Tax in India?

Which ITR should I file?

Tax Savings - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.