Tax Saving Investment Options for 2023

 

Before starting an investment, it is important to explore all the available investment options considering their pros and cons. Here is the list of top tax saving investment options for 2023

Tax Saving Investment Options for 2023: Investing smartly has a double benefit, as it not only helps in accumulating wealth for future but also saves some amount of salary from tax deduction. There are ample options to invest which will help in saving on taxes as well. These options include PPF, NPS, ELSS funds etc.

Many people even start saving as soon as they get their first salary. Tax saving investment options also help in harnessing the power of compounding in long term investments, which helps to grow a small amount of investment at the time of maturity. Know about some of the top tax saving investment options with which you can start your investment journey.

Tax Saving Investment Options for 2023

Public Provident Fund (PPF)

PPF is one of the safest investment options that can be chosen by even those who have just started their investment journey. It is an ideal option for long term investment with safe and high returns. PPF scheme is mandated by the government, hence backed with guaranteed returns. Apart from being a good option for beginner investors, it is also a good way to diversify investments

Also Read: How The New Tax Regime May Affect ELSS Fund Investors?

People can start by investing as low as ₹500 in a month. However, there is an annual limit of ₹1.5 lakh for the maximum investment. PPF investment has a lock-in-period of 15 years. Investors cannot withdraw their funds before the tenure and can also choose to extend the tenure for 5 more years.

Also Read: Tax Saving Guide: Optimum Tax Saving Instruments Under Old Tax Regime

However, there is also an option of premature withdrawal with certain limitations. Investors can also avail loan against PPF investments after three years of account opening and before six years. The Government of India identifies the interest received on PPF. The maturity amount of PPF and the total investment earned during the tenure is tax free.

national pension system

The National Pension System is another voluntary and defined contribution retirement savings scheme, designed to provide cover during retirement. NPS offers tax benefits under section 80CCD(1) with an overall limit of Rs. 1.5 lakh under section 80CCE. Additional deduction for investment up to ₹50,000 in NPS (Tier 1 account) is exclusively provided to NPS subscribers under sub-section 80CCD(1B). There are also tax benefits for the corporate sector, partial withdrawals, annuity purchases and lump sum withdrawals.

Also Read: How Financial Sobriety Can Help You Build Wealth?

ELSS Fund

For those who want to progress a bit and explore some more tax-efficient investment options, they can try investing in equity using ELSS funds. They are called tax saving funds as they offer tax exemption up to a maximum of ₹1,50,000 from the annual taxable income under Section 80C of the Income Tax Act. ELSS Fund is an equity-oriented scheme. It has a lock-in period of 3 years. The amount earned after investing for a tenure of 3 years will be taxed at the rate of 10% by the government as it will come under the category of long term capital gain.

Also Read: Can My Current Investments Help Build A Good Corpus?

tax saving fixed deposit

Tax Saving Fixed Deposit is a special category of Fixed Deposit that allows investors to claim deduction under Section 80C of the Income Tax Act. Investors can claim a maximum tax deduction of ₹1.5 lakh by saving in this option. Tax saving FDs have a lock-in period of at least five years. The account can be opened online or by visiting the bank branch. Interest on tax saving FD varies from bank to bank. Higher interest rates are offered to senior citizens and bank staff members.

Senior Citizen Savings Scheme

Senior Citizens' Savings Scheme is another attractive investment option that can also help in saving taxes. The minimum deposit amount in the SCSS scheme is ₹1,000. The maximum savings amount is ₹15 lakh. However, the account opening option is available only to senior citizens. Only retired persons and senior citizens can take advantage of the scheme. There is age relaxation for retired defense personnel also.