The Best Investments For Tax Deductions

The Best Investments For Tax Deductions

Tax incentives are a labour of love for most investors. It takes hard work and effort to identify lucrative investment prospects and recycle them into diversified portfolios. So, in the middle of proactive engagement with your own investment cycle, being privy to tax incentives will make your investments seem all the sweeter. Here is an article to make you aware of the best tax saving investment schemes available in the country.

Public Provident Fund

The tax benefits accorded under Income Tax Section 80C are really popular among investors. Investing in the Public Provident Fund, you are directly eligible for tax incentives under the above-mentioned tax scheme. This government-sponsored tax saving investment platform has a lock-in period of 15 years and deploys interest rates according to the state of the debt market. Minor withdrawals are permitted from the 6th year of the initiation of the investment and by the 15th year, the maturity amount can be claimed tax-free. It is also possible for Public Provident Fund schemes to be extended for an indefinite frame of time.

Also read: The 5 Best Short-Term Investment Options Investors Should Consider 

Senior Citizen Saving Schemes

The Senior Citizen Saving Scheme is offered by the government of India to people who are above sixty years old. The age bracket is to provide ageing citizens with investment options that are tax efficient. With a maximum investment limit of 15 lakhs and a minimum of 1000 rupees, this investment scheme is relatively open to the average person looking to employ their money to good use. The scheme guarantees returns for the investor and the original amount that was invested is never in any jeopardy. Senior Citizen Saving Schemes are an effective way to build up tax-free profits.

Unit Linked Insurance Plans

The Unit Linked Protection Plan offers an investor life insurance coverage, as well, as savings. The projected interest rates are from 5 percent to eleven but the catch is that an average investor would have to wait close to 12 years to see a tangible upshot in the invested principal. Unit Linked Protection Plans essentially allocate the funds invested in them as shares. This process is transparent as the investor would get to decide how much of their investment should be converted into shares. There is a lock-in period of 5 years and the maturity amount that should be credited to you in 15 to 20 years time, will ultimately be tax efficient.

Also read: 4 Mistakes To Avoid When Diversifying Your Portfolio

Employee Provident Fund

Twelve percent of your salary is liable to be added to Employee Provident Fund. The prescribed 12 percent can be increased according to the wish of the employee. This will essentially turn your Provident Fund into a tax saving mechanism that can be very profitable for you in the long term. The extreme mobility of the provident fund is another factor that makes this such a tax-efficient investment structure. After leaving a job, it is quite easy to attach your Provident Fund to the finance department of the new company. This ensures that you will continue to earn tax deducted savings all through your career.

If tax deductions are key for your financial flexibility, these schemes should definitely be given a twice over. The multiple options available in the market will more than cover your ambitions and personal preferences. Tax incentives are aplenty in the larger scheme of things.

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