Profit-making investments- This will also help you to save on taxes.
Let us understand some amazing investment options where we can earn good returns as well as save taxes
Equity Linked Saving Scheme (ELSS)
Investment in ELSS is eligible for tax exemption under the limit of Section 80C of Rs.1,50,000/-. It is a scheme where the amount gets invested in the mutual fund’s scheme, which means the amount we invest in ELSS is invested in mutual funds and that is why we receive higher returns against the investment as compared to other deductions under section 80C. We should also consider the level of risk in the ELSS scheme as the mutual funds are subject to market risk and return, the same thing would be there in ELSS also. Returns in ELSS would be depending upon the market return.
In ELSS, there is a Lock-in period of 3 years, so we need to consider our liquidity also while investing in ELSS funds because in nearly one to two years if we need that money we should analyze other options rather than ELSS.
While investing in ELSS one should consider the History of the fund, its historical returns, expected returns, its expense ratio, and other financial parameters also.
Unit Linked Insurance Plan (ULIP)
These are similar to ELSS in terms of returns and risk as ULIP is also linked with the market only but with that ULIP will provide its investor an insurance cover also. The return of this Unit linked insurance plan is directly linked with the market returns as the amount gets invested in the stock of various companies. ULIPs are goal-based financial options linked with the capital market and therefore provide flexibility in investing in both equities as well as debt. An investor, depending on his risk appetite can select how much he wants to invest in debt and how much in equity. Investment in ULIP is eligible for deduction under section 80C.
National Saving Certificate (NSC)
It is a government-issued certificate where the issuer promises you to pay a fixed percentage of returns against the investment made. One can start investing in the national saving certificate with any post office branch. It is like a bond that encourages small investors to invest along with claiming deductions under section 80C. Unlike ELSS funds, it has very low risk and that is why it has fixed limited returns. The current rate of interest in NSC is 7%. NSC will also have a lock-in period of 5 years.
Senior Citizen Saving Scheme
With the minimum amount of Rs.1000/- any senior citizen can open his account In this scheme. The maximum amount that can be invested is Rs.30 Lakhs in a single installment, but yes, the deduction would be allowed only up to Rs.1,50,000/- per year under section 80C. Senior citizens resident in India can invest a lump sum amount in the scheme and can get regular incomes along with tax benefits. Accounts under SCSS can be opened with any authorized bank.
Public Provident Fund
Investors who don’t want to take much amount of risk can invest in this scheme. It is not linked with market returns hence it has lower risk and fixed returns. Currently, Interest at the rate of 7.1% is provided to the investor. A minimum of Rs.500/- needs to invest in this scheme whereas a maximum of Rs.1,50,000/- can be invested. Investment amount would be eligible for deduction under section 80C up to Rs.1.5 Lakhs.
The investor would also have the option to take a loan against this PPF account from the beginning of 3rd year till of end of 6th year from the date on which the account gets activated. So, it is a good option that solves liquidity issues also.
National Pension Scheme (NPS)
It is one of the recent developments of the Government of India where an investor can invest and can claim an additional deduction up to Rs.50,000/- under section 80CCD1(b) other than the limit of Rs.1,50,000/- under section 80C. NPS would be regulated by PFRDA (Pension fund regulatory and development authority of India) under the Ministry of Finance, Government of India.
Note – Investments are subject to market risk, conduct your research and use discretion before investing