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Top 4 Tax Efficient Investments

IamCheated.com Research Team | February 28, 2018  6:53:pm

1. Public Provident Fund

The Public Provident Fund is a very popular investment in India and it is backed by the Government. The PPF offers you an attractive rate of interest and it also enjoys the EEE benefit.

The amount invested in PPF will be exempt up to Rs 1.5 Lakhs a year, under Section 80C of the Income Tax Act.  The money accumulated and withdrawn on maturity is also exempt from tax. 

PPF has a lock-in period of 15 years and you can even extend it by 5 more years. You can even take a loan against PPF, from the third year of investment.

2. Debt Funds

You do not get a tax deduction under Section 80C, if you invest in debt funds. Short term gains from the debt funds are taxed on the basis of the income tax slab you fall under.

If you stay invested in debt funds for less than 3 years, the returns you get during that period are considered as short-term gains.

If you stay invested in debt funds for 3 years or more, this will be considered as long-term gain and you can enjoy the indexation benefit. Indexation helps save tax be inflating the purchase price.

3. Tax saver FD

If you invest in tax saver FD, you will get a deduction up to Rs 1.5 lakh a year, under Section 80C of income tax act. The interest you receive from tax saver FD is taxed on the basis of the income tax slab you fall under.

Money invested in the tax-saver FD will be locked for 5 years. Tax saver FD offers fixed interest for 5 years and senior citizens enjoy high rate of interest.

4. Post Office Schemes

Post office schemes help you save tax without taking any major risk. Post office schemes are very secure and offer guaranteed returns. If you invest in post office term deposits (POTD), you will qualify for deductions under Section 80C. Interest on post office term deposits varies from 7.1-7.9% for a 5 year deposit. The interest you earn from POTD is taxable, but there is no TDS.

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