Tax Saving Tax Saving Instruments ie Tax Saving Instruments also get strong returns from tax saving instruments, then it becomes icing on the gold for the investors. In the changing financial market, there are many options that give you both tax savings and returns.
Equity Linked Savings Scheme (ELSS) and National Pension Scheme (NPS) are two such schemes, where investors can invest money to not only save big but also earn huge returns. Vikas Singhani, CEO, TradeSmart, explains how one can save up to Rs 2 lakh in tax by investing in just these two options. Also, there is a lot of potential for big returns on it.
ELSS gives tax exemption of 1.5 lakhs
An Equity Linked Savings Scheme (ELSS) under Section 80C of Income Tax allows an individual or HUF the option of exemption up to Rs 1.5 lakh. These schemes have a lock-in period of three years after which they can either be redeemed or invested. It comes in both growth and dividend options and the investor also has the facility to invest money through SIP.
Although the maximum investment in this scheme takes place between December and March, when people are looking for lump-sum option of tax saving, but if you use it from the beginning, then better returns can be found in the long term. On this, the benefit of compound interest is available. These schemes have given returns of 16-23 per cent in the last five years. However, for this, you will have to invest 80 percent of the amount in equity.
50 thousand plus tax exemption on NPS
Under NPS, the investor gets the prescribed tax exemption of Rs 1.5 lakh under section 80C. Also, an additional Rs 50,000 can be claimed under sub-section 80CCD (1B). Let us not forget the employee’s contribution to the NPS account, who can avail tax exemption under section 80CCD(1) of the IT Act, up to the contribution of 14 per cent of the basic salary and dearness allowance.
The popularity of NPS has steadily increased. Any person between the age of 18 to 70 years can join NPS. You can continue this till you are 75 years old. The reason for its popularity has also been to give higher returns. In the scheme, new investors can invest up to 75 percent in equities. Due to investing money in the market, there is scope for returns of 10 to 20 percent on this too.