6 Tax-Saving Investments To Consider Before The Year-End

By planning and finalising your investments early, you give yourself ample time to choose investments that align with your financial goals, instead of rushing to invest at the eleventh hour.

Tax-saving investments are crucial you’re your financial journey as they help you reduce your tax liability.

Source : ABPLIVE AI

With 2024 about to conclude, it is time to finalise and submit investment proofs to your employer. The deadline for this is usually set for December 31, for good reason. By planning and finalising your investments early, you give yourself ample time to choose investments that align with your financial goals, instead of rushing to invest at the eleventh hour. Tax-saving investments are crucial you’re your financial journey as they help you reduce your tax liability. However, do note that you can only avail of tax deductions under various sections of the Income Tax Act under the old regime. So, if are still planning your tax-saving investments for this financial year, here are some options you can explore.   

Equity Linked Savings Schemes (ELSS) 

ELSS are tax-saving mutual funds that invest largely in stock markets and offer tax deductions up to Rs 1.5 lakh per year under Section 80C of the Income Tax, 1961. Featuring a lock-in period of three years, these funds can potentially offer higher returns with long-term investing. 

Fixed deposit (FD)

Tax-saver fixed deposits are a unique investment that combines low-risk and tax-saving benefits in one. These FDs are independent of market shifts and thus, provide steady, assured returns. Moreover, investments in tax-saver FDs up to Rs.1.5 lakh are eligible for tax deduction under Section 80C of the Income Tax Act, 1961. However, these deposits do have a five-year lock-in period and the interest earned is taxable. 

Public Provident Fund (PPF)

Among the various tax-saving investments, the Public Provident Fund (PPF) is one of the most popular. This long-term investment and savings option has a tenure of 15 years and currently offers an interest rate of 7.1 per cent . What sets PPF apart are its tax-saving benefits–the investment, interest earnings, and returns up to Rs.1.5 lakh in a financial year are tax-free under Section 80C.

National Savings Certificate (NSC)

NSC is a long-term, government-backed savings scheme targeted mainly at small to mid-income investors. Investments in NSC up to Rs.1.5 lakh per year qualify for tax deduction under Section 80C. However, the interest earned is still subject to tax. This scheme comes with a tenure of five years and currently offers an interest rate of 7.7 per cent per annum. You can invest in an NSC for yourself, with another adult as a joint investor, or even on behalf of a minor. 

Senior Citizen Savings Scheme (SCSS)

The Senior Citizens Savings Scheme is a government-backed savings scheme designed to provide steady post-retirement income for individuals aged 60 and above. Similar to NSC, SCSS investments also qualify for tax deductions of up to Rs.1.5 lakh under Sec 80C. With an interest rate of 8.2 per cent , the scheme features a 5-year tenure which can be extended by an additional 3 years. 

National Pension Scheme (NPS)

NPS is a retirement-oriented savings scheme that invests in a variety of assets and is an ideal tax-saving avenue for investors with varying risk appetites. NPS contributions are tax-deductible under different sections of the Income Tax Act, 1961–Subscriber’s contribution to Tier I investments is tax-deductible within the total limit of Rs 1.5 lakh under Sec 80CCD (1). In addition to this, subscribers can also claim an additional deduction of up to Rs 50,000 for Tier I contributions under Sec 80CCD 1 (B). 

Tax-saving investments are powerful tools to reduce your tax liability. By planning such investments early, you can avoid the stress of last-minute decisions which may derail your financial goals. However, keep in mind that deductions for these investments are only available under the old tax regime. 

The author is the Senior Manager, Communications in BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar.