When should you start planning your taxes? Some professionals plan at the start of the financial year, ensuring they have enough time to identify the ideal investment avenues to boost their finances while minimizing their tax liability. Most people, however, scramble at the last moment to find a tax-saving investment that reduces their overall tax burden. For 2023-2024, here are some of the best tax-saving tools to help you with your financial planning.
Best Tax-Saving Investment Options for 2024
The NPS is a tax-efficient investment option that provides retirement benefits and tax savings. Contributions to your NPS Tier-1 account offer tax deductions of up to Rs. 1.5 lakhs per year under Section 80C of the Income Tax Act. An additional deduction of Rs. 50,000 is available under Section 80CCD(1B). The amount you contribute to the NPS gets invested in four asset classes based on your risk appetite and investment goals. You can select how much gets invested in Equities, Corporate Debt, Government Securities, and Alternative Investment Funds. The NPS aims to create a corpus for retirement and automatically limits your exposure to high-risk investments like equities and alternative investment funds. You can select an investment portfolio based on your personal risk appetite and goals or automate your asset allocation. Over time, the corpus earns returns on your investment and grows. When you’re ready to retire, you can withdraw a portion of the accumulated amount tax-free. You can use the rest to purchase an annuity, ensuring a regular income stream during retirement.
Life Insurance Products
Life insurance policies offer coverage that helps protect your family’s financial future. These plans offer tax benefits of Rs. 1.5 lakhs per year against premiums paid under Section 80C of the Income Tax Act. Many insurance plans provide maturity benefits and investment components, allowing you to build a corpus that helps you meet your long-term goals.
Public Provident Fund (PPF) and Tax-Saving Fixed Deposits (FDs)
Both PPF and FDs are long-term tax-saving investment options offering guaranteed returns. They enable you to claim deductions up to Rs. 1.5 lakhs against the amount you invest under Section 80C of the Income Tax Act. Both options work on compounding interest, ensuring you enjoy guaranteed returns on maturity.
Selecting the Best Option
The key to successful tax-saving investments is thorough research, careful analysis, and personalized planning. Assess your risk appetite, investment horizon, and financial goals before making decisions. Each tax-saving investment option provided helps build long-term wealth to meet financial goals. However, the NPS offers the maximum savings on tax with a total tax deduction of Rs. 2 lakhs each year. Apart from the tax benefits, the NPS helps build financial discipline and secures your financial future while giving you control over your investment. The Pension Fund Regulatory and Development Authority (PFRDA) regulates the NPS. They review the performance of various fund managers, enabling you to invest safely.
Now that you understand the various tax-saving investment options, you can make informed financial decisions. Visit the HDFC Pension website and open an NPS account to maximize your tax savings while planning for the future. Ensure you invest money regularly to build a corpus to safeguard your retirement. Once you choose your investment strategy, ensure you review and reassess your portfolio regularly. The NPS allows you to switch from one investment option or fund manager to another. As the financial landscape evolves, new investment opportunities may arise, and existing avenues may change. Stay vigilant and adapt your strategy to take advantage of changing market conditions. With prudent financial planning and a proactive approach, you can pave the way towards a financially secure future while optimizing your tax liabilities.