These Tax Saving Investment Options Are Good To For Last-Minute Tax-Savings

Given that we are nearing the close of the fiscal year 2021-2021, some of us may still be able to make tax-saving investments for this year. Even at the last minute, before the financial year ends, there are methods to save money on taxes. These four fast tax-saving products do a lot more.

Equity-linked saving schemes (ELSS)

It is a kind of mutual fund that allow its investors to invest in the equity market and claim tax deductions under Section 80C of the Income Tax Act, 1961 up to Rs 1.5 lakh (overall). If an investor was to invest Rs. 50,000 in an ELSS, then this amount would be deducted from the total taxable income of the taxpayer

The scheme comes with a three-year lock-in, which is the shortest lock-ins among tax-saving investments. You can invest in ELSS funds through lump sum or SIP (systematic investment plans). There is no limit to the amount of time you can remain invested in an ELSS fund after the 3-year lock-in period.

Funds are tailored to specific investment objectives and levels of risk. The fund doesn't allow premature withdrawal as the fund has a lock-in period. Instead of trying to take advantage of ELSS funds' rapid tax relief, you should invest frequently for your own long-term gain.

VPF

If you are not a risk-taker, you can go for the provident fund (PF). It is an alternative for risk-averse individuals who don't want to participate in the turbulent financial markets such as Mutual Funds or the Stock market and want to invest for the long term. You can use Voluntary Provident Fund (VPF) to boost your contribution to up to 100% of your basic pay in your employer-provided Employees' Provident Fund (EPF) scheme.

 In a recent development, the EPF interest rate reduced from 8.5% to 8.10% per year applicable for the FY 2022-23. Despite this reduction, it is more than any other comparable debt investment scheme and it is also tax-free at retirement if your yearly contribution does not exceed Rs 2.5 lakh. Investment in EPF is safe and secure. 

PPF

If you don't have an EPF account, you can still opt to invest in the provident fund by investing in the Public Provident Fund (PPF). The scheme is backed by the Government of India. It is one of the most popular long-term investment options that offer a high level of security for your money. 

You'll also be able to earn a competitive rate of interest and receive tax-free returns. Investors even get facilities such as loans, withdrawals, and extensions of accounts. PPF currently offers 7.1% per annum. It offers tax benefits and the advantage of assured returns over the long term. It is a risk-free and tax-free investment option. 

Note- Contributions to both EPF and PPF are tax-exempt under Section 80C. These investment tax advantage products can be part of your planning for long-term goals. Both schemes are long-term ones and therefore not high on liquidity. 

Health Insurance Plans

A health insurance policy not only offers financial aid in case of emergencies but also provides various other financial benefits. These Plans offer you financial protection against medical emergencies as well as a tax deduction.

The premium paid towards health insurance either for yourself or your family offers tax benefits under section 80D of the Income Tax Act. Deductions can be claimed for two different policies. However, the amount of tax benefit you can claim is limited. The maximum deduction that may be claimed for any group is Rs 30,000 if the policy members are under 60, or Rs 50,000 if they are 60 or over.

Bottom Line

Effective decision-making is a skill that cannot be learned immediately and must be maintained over time. Remember that last-minute tax preparation can lead to hasty and ill-considered judgments that end up costing you money in the long run. So, even if you're investing on the spur of the moment, take the time to review the product's primary elements, such as liquidity, purpose, estimated returns, tenure, lock-in duration, and more.