So, this time of this year is again. Your inbox is filled with reminder about saving taxes before the deadline, and your HR has probably sent several emails about presenting investment evidence.
If you are a smart investor, or want to be one, you know that tax saving is not one day’s job; This requires some plans. Ideally, you should not throw money in any financial product at the last minute. One should focus on increasing your money, reducing the burden of your tax.
Surprisingly how to invest taxes that really understand? You are in the right place. Let’s break it.
First of all, understand how to work
As a salaried professional or owner of business, you fall under either new or old tax regime. It is important to do mathematics first, with zero tax liability on income up to ₹ 12.75 lakhs, especially with a major tax relief with the Union Budget 2025.
There are seven slabs in the new tax regime, which starts at 0% for income up to ₹ 4 lakh and is going up to 30% for income from ₹ 24 lakh. But if you are clinging to the old tax regime, you can still claim deduction and discount to reduce your taxable income. Here are some options that you can consider.
1. ELSS-tax-saver for risks
Equity Linked Saving Scheme (ELSS) funds are a favorite among young investors as they provide a combination of tax savings and high returns. Unlike traditional tax-saving options such as FDS, the ELSS is connected to the market, which gives them the ability to generate too much returns over time.
In fact, data of the last decade shows that ELSS funds have given average annual return 14.24% over a period of three years. This makes them an attractive option for investors wishing to take some risk for better growth. In addition, they qualify for a deduction of up to ₹ 1.5 lakh annually under Section 80C.
Since ELSS funds are subject to ups and downs in the market, financial experts often recommend investing through systematic investment plans (SIPs) rather than lump sum. This approach helps average market volatility and reduces the risk of investment at high point. A well-balanced ELSS portfolio should include a mixture of large-caps, mid-cap and small-cap stock. While risks exist, the possibility of earning 10–12% annual returns (or even more in markets) makes ELSS a solid option for tax-loving investors.
2. PPF- Safe bets
If you are someone who prefers security on high returns, then Public Provident Fund (PPF) is a safe bet. About 7–8% (varies quarterly) and offering the interest rate of triple tax exemption status (EEE-free-free), PPF is an excellent option for those who want risk-free investment with guaranteed returns.
One of the biggest benefits- the interest earned is completely tax-free, unlike FD. Also, the principal, interest and maturity amounts are all free from tax. However, there is a 15-year lock-in period, which makes it more suitable for long-term financial goals such as retirement or child education.
Although PPF lacks liquidity in the early years, partial withdrawal is allowed from the 7th year, and you can take loans against your balance if needed. This risk discourse is best suited for investors who want a stable, government-backed return without worrying about market fluctuations.
3. Women and money
Over the years, more women are stepping into entrepreneurship and are also becoming more active investors. According to the AMFI-CRISIL study, women are now 33% of the total individual investors’ AUM, and one of the four mutual fund investors. This is a strong indicator of the growing change towards financial freedom.
If you are a female entrepreneur, the Indian tax system provides some relief to simplify the filing and reduce financial management. For example, the prescribed taxation plan (Section 44AD) makes the tax filing very easy. If your business depends on digital transactions, you only pay 6% tax instead of 8% on cash transactions. In addition, the turnover limit for businesses has been increased to ₹ 3 crore, allowing more flexibility.
Higher education is another field where smart tax planning can help. If you are receiving degrees in India or abroad, Section 80E of the Income Tax Act claims you a 100% deduction on the education loan interest payment for up to 8 years, without any upper limit. Important savings means when you focus on building your career.
4. NPS- Retirement Hack
The National Pension System (NPS) is a long -term retirement investment that provides up to ₹ 2 lakh in tax deduction, ₹ 1.5 lakh under Section 80C and up to ₹ 50,000 under Section 80CCD (1B). If you are in a high tax bracket, the NPS can be a valuable additional for your portfolio, which helps reduce your taxable income when constructing a retirement corpus.
Infact, NP has a significant advantage on Employees Provident Fund (EPF). The employer’s contribution to the NP qualifies an additional cut under Section 80CCD (2), which can reduce taxable income. EPF still remains a strong option for those who prefer stability and guaranteed returns, as it provides fixed, tax-free interest.
5. Ulips- Insurance + Investment + Tax Benefits
If you want to combine life protection with money creation, then Unit Linked Insurance Plan (ULIP) There is a great option. They allow you to invest in a mixture of equity and date funds, ensuring financial security for your family. The paid premiums are eligible for tax benefits under Section 80C, and if the annual premium is within the prescribed limit, maturity income is tax-free under Section 10 (10D).
This category is one of the standout options HDFC Life Click 2 InvestmentDoes it make it special?
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Get fund price in maturity or periodic installments depending on your requirements.
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If any, make a partial return from money to meet financial emergency conditions.
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Pay once under flexibility or single salary to save regularly for a limited period of 5, 6, 7, 8, 9, and 10 years.
When it comes to tax-saving investment, there is no size-fit-all approach. The key is to align your choice with your financial goals, risk hunger and long -term plans. Whether you prefer the safety of traditional options or growth capacity of market -related investments, making further plans really makes a difference.
