For tax saving, investment has to be made ahead of time and then the documents related to investment have to be given as proof to the Income Tax Department. You can save tax by investing in all government savings schemes.
Public Provident Fund (PPF) – PPF is the most popular tax saving scheme in India. You can invest up to Rs 1.5 lakh annually in PPF. The government gives a guarantee on investment in PPF, that is, the money will not sink. At present, the government is paying 7.1 percent annual interest on PPF. In this, income tax exemption is available on investment under section 80C. Money in Public Provident Fund (PPF) has a lock-in of 15 years.
Sukanya Samriddhi Yojana (SSY) – You can do tax saving by opening an account in Sukanya Samriddhi Yojana (SSY) in the name of your daughter who is less than 10 years of age. This is a small savings scheme, which has been launched by the Modi government. Income tax exemption can be availed in this scheme by depositing a maximum of Rs 1.5 lakh annually. At present, the government is giving 7.6 percent annual interest on this scheme.
Equity Linked Savings Scheme (ELSS) – Equity Linked Savings Scheme (ELSS) is a type of equity fund and it is the only mutual fund which offers tax exemption of up to Rs 1.5 lakh under section 80C of the Income Tax Act. In ELSS, returns/profits up to Rs 1 lakh per annum are not taxable. ELSS has the shortest lock-in period of 3 years which is better among all the tax saving investment options. Apart from this, you can also save tax by buying Tax Saving FD and Unit Linked Insurance Plan (ULIP).
Senior Citizen Saving Scheme (SCSS)- SCSS is a better saving scheme for senior citizens. This savings account can be opened in a bank or post office. Income tax exemption can be taken under 80C on the amount deposited in this account. The maximum one can invest in this is Rs 1.5 lakh annually. At present, there is a provision of interest of 7.4% per annum.
National Pension System (NPS) – National Pension System (NPS) is a government retirement savings scheme. Under Section 80C of the Income Tax Act, in addition to Rs 1.5 lakh, an additional benefit tax of Rs 50,000 can be taken. By investing in NPS, you can take advantage of a total exemption of Rs 2 lakh in Income Tax. The government is also promoting NPS. You can start investing from Rs 1000 a month. Any Indian citizen whose age is between 18 to 65 years can open an account in this scheme. NPS account can be opened in any bank.