Five Tax-Free Investments, Deductions For Young People
Investments can be made into Public Provident Fund, Employee Provident fund, National Savings Certificate under Section 80C.
Between bills and budgets, there is very little bucks that young people can spare. But, squeezing out just a little to invest in any of these schemes can make a difference in the long run.
Investing into these instruments act like a foundation to building an efficient tax strategy. These tax-free instruments are part of the benefits available under the old-tax regime with annual investment limits. Here are five tax-free investments one can make that will build an effective strategy for the long run.
Section 80C
There are a few options that are under this section. Investments can be made into Public Provident Fund, Employee Provident fund, National Savings Certificate. Investors can invest up to Rs 1.5 lakh in any of these instruments in one year.
"PPF is to be used as a choice for retirement planning among the bouquet of instruments available and chosen," said Arnav Pandya, founder of Moneyeduschool. All deposits made into the PPF account are deductible under Section 80C of the Income Tax Act.
Section 80D
This section allows the health insurance premium paid by individuals for their cover. The premiums for the cover of the family can also be deducted. The limit for claims is Rs 25,000 per year for individuals.
"Life insurance premium to be paid for term policies that provide adequate cover. Medical insurance is also a must for every member of the family," Pandya said.
It is also important to note that the deduction limit for senior citizens who are above the age of 60 is Rs 50,000 per year.
Section 80E
This section allows individuals with a deduction on the interest paid on their education loan availed for higher studies. "Expensive educational loans taken brings the need for an investment like this to be undertaken," he added.
Section 80CCD
Early investments into this scheme can give young people a head-start when it comes to building their retirement corpus. Retirement planning can be done with with additional tax-saving with this scheme.
NPS should be used for retirement planning, especially by young people.Arnav Pandya
Home Loan
There are deductions for principal and interest repayment when the individual has taken a home loan.
Despite these deductions that are available, its important to understand that a house should be only be bought if it is needed and not for the purpose of saving taxes.
Finally, there are also tax-saving mutual funds for those interested in equity exposure.
