If you want to create wealth while saving money, you can do so. Income tax rules allow this. There are several investment schemes that can help you build substantial wealth while also providing tax savings.
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Many people want to combine tax-saving benefits with their investments. There’s nothing wrong with doing so. Tax rules allow it. This strategy makes a significant difference in the long run. If you’re 30-35 years old, using this strategy can create a substantial corpus over the long term, which can be useful for your children’s higher education, their marriage, or even after retirement. Let’s explore five such easy ways.
1. Invest in ELSS
You can invest monthly in a mutual fund’s tax-saving scheme through SIPs. This scheme is also called an Equity Linked Savings Scheme (ELSS). Mutual fund houses offer ELSS. The returns from this scheme are very attractive. You can claim tax deductions on your investments every year. This scheme has a lock-in period of three years. This means you cannot withdraw your funds for three years after investing. This rule ensures your money remains invested for a long time, giving it ample opportunity to grow.
2. Open a PPPF account
The Public Provident Fund (PPF) is one of the oldest and most trusted investment schemes. Being a government scheme, investing in it is completely risk-free. The returns from this scheme are quite attractive. The scheme matures in 15 years. If needed, withdrawals are allowed after six years. After maturity, the term of this scheme can be extended. It is a fixed-return scheme, so its returns are not affected by stock market fluctuations.
3. Sukanya Samriddhi Yojana
This is also a government investment scheme. Therefore, investing in it is completely safe. If you have a daughter, you can open a Sukanya Samriddhi account. The condition is that the daughter must be under 10 years of age. This account can be opened for a maximum of two daughters. The Sukanya Samriddhi Scheme has the highest interest rate of 8.2% among government investment schemes. This scheme matures in 21 years, but investments are required only for the first 15 years.
4. Deduction on Tuition Fees
If your children are in school or college, you can claim a deduction on their tuition fees every year. This is the only tax-saving method that doesn’t require any investment. You can claim a deduction on the tuition fees of up to two children. To do this, you need a certificate proving your tuition fees have been paid. Schools and colleges provide this certificate upon request. This can help you save thousands of rupees in tax each year.
You need to keep in mind that the methods described above can only be used by taxpayers who use the old income tax regime. If you use the new regime, these methods are not suitable for you. Section 80C of the Income Tax Act allows you to claim a deduction on investments up to a maximum of Rs 1.5 lakh per financial year. This significantly reduces the tax burden. Section 80C covers about a dozen investment options, including the methods described above.
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