I need to invest Rs 50,000 to save taxes. What are the best tax-saving instruments?
Ullhas Khote, Pune
Assuming you are looking to save taxes under Section 80C of the income tax, which has an upper limit of Rs 1.5 lakh that one can park in the list of instruments in which savings and investments qualify for tax deduction under this section. You could choose from life insurance, PPF, Equity-linked savings scheme (ELSS), National Pension System (NPS) and others. Remember, when deciding on a tax-saving scheme, you should keep in mind issues like the duration of the scheme, lock-in period, risk factor, returns, and taxability of returns. For example, PPF is a 15-year scheme which declares a fixed return that one earns on it as opposed to Equity Linked Saving Schemes (ELSS), where the lock-in period is just three years and the investment is in equities. Choose based on your financial needs to make tax savings meaningful instead of blindly choosing an instrument just to save income tax.
