All governments collect taxes from their citizens. This is a crucial process that lets Government function. It spends the taxed money on various things that benefit the nation as a whole. There are many fields that Government needs to step up and perform services that can not be left on to private organizations. Let’s take an example, maintaining an armed border force is essential to a country. Who would you rather have it controlled by? If an elected government is the preferred administrator, who will pay the salaries of the Army men? Thus, the government needs to maintain a standing coffer. And the only effective way to build this is through a tax system that’s just and realistic.
There are many such expenses that Government has to take care of. We pay taxes so that Government can work efficiently. The Government taxes us on many levels. It taxes the companies for the profit they make. We also pay indirect taxes on the consumption of products and services. But the biggest tax bracket that most people worry about is that of Income Tax. Why? Well, the cost of living is a substantial problem for everyone and savings on taxes is not a wrong move/.
There are various tax saving schemes that can be employed by the citizens of India. Nobody wants to pay large taxes. That’s just human nature. We all are looking to save money on our taxes. The government of India levies a tax on our income. Everyone falls under one of the income tax slabs imposed by the government. There are multiple tax saving options offered by government and private organizations to help you save money. Let’s take a look:
1. Tax Saving Fixed Deposit
This is a special kind of Fixed Deposit. This FD is similar in most functionality. The investors are not allowed to make any untimely withdrawal from the scheme. The funds can not be withdrawn for a minimum period of five years. The great thing about this scheme is that interest earned on Tax Saving Fixed Deposits is completely tax-free! The investors enjoy the luxury of Peace of Mind and also avail Maximum Benefits.
2. PPF - Public Provident Funds
The government provides another great tax haven in the form of a Provident Fund, known as Public Provident Fund. Any individual can park his or her income in a PPF account. It is probably the most secured investment present out there. You can draw maximum tax savings using this with the additional benefit of safety. This is because PPF is backed by the Indian Government. Almost every bank in India provides the PPF facility to its customers. The interest paid out on the PPF account is not taxed by the Government as well.
3. EPF - Employee Provident Fund
In every private organization, employers must maintain an Employee Provident Fund for every individual. Under this fund, the employers must subtract 12% of the salaries of the employee and parks it in EPF. At the same time, the employer makes the same contribution to the individual EPF account of the employee. This investment is eligible for tax deduction. EPF is another great schemes. It remains one of the safest bet as the funds remain parked with the Government of India.
4. NPS - National Pension Scheme
National Pension Scheme is another great option that can be used to protect yourself from the heat of the tax. Any investor can put any amount of money in this scheme, based entirely on their preference and convenience. In the NPS scheme, the minimum lock-up period of the funds is for over 3 years. If you think you are going to require your funds prior to the completion of the stipulated time period, you can opt for the dividend option. This option offers you tax-free dividends.
5. SCSS - Senior Citizens Saving Schemes
The Senior Citizens Savings Schemes (SCSS) offers special benefits to the elderly. It is supposedly the best tax savings scheme available to senior citizens! It provides a regular source of income as well, in the form of interest. Also, the range for investments starts as low as Rs. 1000 and goes all the way up to Rs. 15 Lacs.
6. L.I.S - Life Insurance Schemes
Another great tax saving options that help you save taxes is the Life Insurance Policy! Be it traditional policy or a market-linked scheme, it offers tax benefits to all the policyholders. This benefit is provided under the Section 80cc. There are various life insurance plans that policyholders can take advantage of-
1. Term Plans
2. Endowment Plans
3. Money-back Plans
Each and every policyholder, regardless of the nature of their policy, are eligible for Tax Benefits.
7. Medi-claim or Health Insurance
The Mediclaim or the Health Insurance offers tax benefits to the policyholders under Section 80D. All Insurance premiums up to Rs. 20,000 are eligible for tax benefits. For senior citizens, the premium limit is set at Rs15,000.
8. Term Insurance
A Term Insurance is different from other insurance policies because once its period matures, there is no amount that is paid out. There are certain tax benefits attached to this scheme. In case of an unfortunate event that leads to policy holder’s death, the family of the policyholder is secured. Also, this policy is relatively cheaper than other insurances. Thus, they are a decent investment option for anyone looking to save money on their taxes.
Tax saving schemes are a crucial financial tool that must be utilized for their rewarding nature. They can be challenging because there are so many choices to choose from. If you end up making the wrong choice, you get stuck with an investment vehicle that’s unsuitable for you got a period of 3 to 5 years. But it can be infinitely rewarding when you choose the right tax instrument, that perfectly suits your needs.