New Year 2019 investment resolution: Make most of tax saving schemes; know from ELSS, PPF to Sukanya Samriddhi Yojana, life insurance

With 2019 just around the corner, many of us are busy planning on how to celebrate December 31. It is also the time when many of us would make a new year resolution. Hence, why not involve investment as your new year plan for 2019. Guess what! 2019 will also bring in the Union Budget for FY2018-19, where one can expect some measures in regards to taxes. If given a choice, most of us would agree that we do not want to pay tax on the income we earn. However, things do not happen according to us because income tax we pay is an important tool of revenue for the government.

While our government expects us to pay income tax in right manner, it also provides us various platforms where we can save our tax.

There are host of options that can help a taxpayer in saving hefty sum on their taxes. 

Archit Gupta, Founder & CEO ClearTax says, "While investing is a good habit, investing in tax saving options is what you should be really after to maximize your savings."

To break it down for you, ClearTax have listed out some of the best tax saving investment schemes for you to choose from.

1. Equity-linked saving schemes(ELSS):

ELSSs is a tax-saving equity mutual fund with 2 interesting features- one, the amount invested in these schemes qualify for tax benefits under Section 80C of the Income Tax Act 1961 for a sum of up to Rs. 1,50,000 a year. Second, the investment has a lock-in period of only 3 years. From 1 April 2018, any long-term capital gains in excess of Rs 1,00,000 on the sale of equity-linked tax saving funds will be taxable @ 10% over. This is still a very good bet given the growth possibilities of these schemes.

ELSS has been rewarding the investors with about 12% returns every year. So, if you are worried about your tax savings this year, you should start investing in ELSS. This investment will qualify as a deduction under Section 80C and also generate better potential returns in its shorter lock-in period.

2. Public Provident Fund(PPF):

Investing in PPF has been one of many people’s favorite saving avenue. Investors with a lower risk appetite can save their taxes by investing in the PPF. The principal as well as the interest are guaranteed and are also tax-free.

You can open a PPF in your name or on behalf of a minor of whom you are a guardian. The minimum amount to invest in PPF is Rs. 500 and the maximum is Rs. 1,50,000 in a Financial Year(FY). The amount invested will qualify for deduction under Section 80C up to Rs. 1,50,000. 

PPF is currently offering 8% return per annum. This return is re-invested every year and the interest accumulates at a compounding rate. The re-invested amount is also eligible for deductions under Section 80C. If you invest in a PPF right now, you will get a long-term sovereign guarantee of returns and also save taxes. However, ELSS scores over returns from PPF and also allows you to exit earlier; the lock in period for PPF is 15 years.

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3. Life & Health Insurance Plans:

Investing your money in buying life and health insurance will serve you the purposes of both tax-saving and insuring yourself. Under Section 80C, you will get the deduction of the premium paid by you for the life insurance policy. You can claim a maximum deduction of Rs. 1,50,000 under Section 80C which will also include the life insurance premium paid in a particular FY.

Similarly, health insurance premium gives you benefits under Section 80D.  You can pay and claim a deduction of up to Rs. 25,000 for health insurance of self, spouse and dependent children, under section 80D. You will also be eligible for an additional deduction for health insurance of your parents to the extent of Rs 25,000 (if they are less than 60 years of age) or Rs 50,000 (if the parents are more than 60 years old). Also, a deduction of Rs. 5000 is allowed for preventive health checkups to the individual, which is within the limits specified above.

4. Invest in Sukanya Samriddhi Yojana:

Sukanya Samridhi Yojana (SSY) is a small deposit scheme for a girl child. This scheme was introduced as part of the Beti-Bachao-Beti-Padhao campaign. 

Being a father or a mother of a girl child, you can open an account under SSY anytime after her birth till she turns 10. The minimum amount to open the account is Rs.1000. A maximum of Rs 1,50,000 can be deposited during a financial year. The account will remain operative for 21 years from the date of its opening or until the marriage of the girl after she turns 18. 

Currently, SSY is fetching an interest of 8.1% per annum and also offers you tax benefits. This scheme has an Exempt-Exempt-Exempt (EEE) status. The SSY investment qualifies for Section 80C deduction with its maturity amount being non-taxable.

Investing in any or all of these is bound to help you cut back on your taxes and also boots your wealth growth. While some investments are risk-free, do measure your risk profile before investing in some of the others.