1. Tax saving investments are retirement planning- National Pension Scheme (NPS)
The NPS is amongst the best tax saving scheme because it provides tax exemptions under three different sections. The contribution of up to 1.5 lacs can be claimed under Section 80C of the IT act. Under section 80CCD one can also get additional deduction of up to INR 50,000. Also, if 10% or more of the basic salary of any employee is contributed in the NPS, then the amount is not taxed.
2. Protection from uncertainties and tax saving investment - Unit Linked Insurance Plan (ULIP)
ULIP is a tax saving instrument which provides the dual benefits of tax savings combined with high returns over a long period. It offers a combined benefit of insurance and investment, and one can get the benefit of taxability of income on the premium paid under section 80C of the IT Act. ULIP however, has a lock in period of 5 years.
3. Provident Fund for all - Public Provident Fund (PPF)
PPF is the most popular tax saving scheme amongst Indian taxpayers. It helps the investors to save money on taxes and at the same time, creates a financial aid for retirement planning. PPF has a maturity period of 15 years, which can be further extended for 5 years. A minimum amount of INR 1.5 lacs can be claimed for exemption under Section 80C of the IT Act. PPF is probably the safest investment instrument which offers the benefit of returns on long term investments.
These are some of the leading tax saving schemes which can be opted in order to save money on taxes and at the same time, also help in generating extra income. There are various other tax saving investment options too, like the Sukanya Samriddhi Yojana, Bank Fixed Deposits, Insurance etc. which are exempted in Income Tax and can also provide tax free returns over long periods.
However, it is very important to go through all the aspects of the investment plan for investing your money. Each scheme is targeted at a different group of investors, and thus what is beneficial for one will not necessarily provide you the same benefits.
