Tax saving tips: There is no doubt that a large part of our income is spent in paying taxes. At present, in India, tax is being collected according to the rules of two different tax systems. In the old tax system, income up to Rs 2.5 lakh is tax-free. Tax has to be paid at 5% on income from Rs 2.5 lakh to Rs 5 lakh, 20% on income from Rs 5 lakh to Rs 10 lakh and 30% on income above Rs 10 lakh.
How is the tax slab in the new tax system?
On the other hand, in the new tax regime, income up to Rs 3 lakh is tax-free. 5% on Rs 3 lakh to Rs 7 lakh, 10% on Rs 7 lakh to Rs 10 lakh, 15% on Rs 10 lakh to Rs 12 lakh, 20% on Rs 12 lakh to Rs 15 lakh and earning above Rs 15 lakh But 30% tax has to be paid. However, there are many rules in the country through which tax can be saved. Today we will learn about some such savings and investment schemes, where a lot of tax can be saved by investing money.
ELSS Funds
ELSS (Equity Linked Savings Schemes) funds are a category of mutual funds. ELSS funds come with a lock-in period of 3 years. You can save tax up to Rs 1.25 lakh on these funds. Let us tell you that ELSS funds have given returns of about 19.39 percent in the last 5 years.
NPS
NPS (National Pension System) is a long term pension scheme, in which money has to be invested till retirement. After the scheme matures, a part of your total corpus is received as a lump sum and a part goes to the pension fund. There are 3 different ways to save tax in this scheme. First of all, there is exemption under Section 80C on contributions up to Rs 1.5 lakh. Then, under section 80CCD(1B), additional deduction up to Rs 50,000 can be availed and under the third benefit, 10 percent of the company’s contribution to the basic salary has been kept tax-free. If you choose the new tax system then this limit becomes 14 percent. NPS has given returns ranging from 7.5 to 16.9% in the last 5 years.
Retirement Mutual Funds
Retirement mutual funds are a category of mutual funds. These come with a lock-in period of 5 years. A lot of tax can be saved by investing in retirement mutual funds. Let us tell you that retirement mutual funds have given returns ranging from 9 to 19 percent in the last 5 years.
ULIP
ULIP (Unit Linked Insurance Plan), is a great scheme. In this, a part of your investment goes in the stock market while the remaining part goes in the insurance plan. Earnings from ULIP are completely tax-free under Section 10(10D). However, the life cover for this should be at least 10 times your annual premium. This scheme also comes with a lock-in period of 5 years. It has given returns ranging from 7 to 18 percent in the last 5 years.
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