Investment

Tax Free Income and Investment Options That You Didn’t Know About

total reads

35,178

total reads
35,178

Investors are always looking for options that generate tax-free income. The good news is that there are plenty of tax free investments in India for investors.

Listed below are tax free investments that meet a variety of needs and financial goals:

Sr No. Best Tax Free Investments Maximum Annual Investment Tax Benefits
1.

Life Insurance

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80C and Section 10(D)
2.

PPF (Public Provident Fund)

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80C and Section 10(D)
3.

NPS (New Pension Scheme)

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80CCD
4.

Pension

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80CCC
5.

Life Insurance

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80C
6.

SCSS (Senior Citizens Saving Schemes)

Single Holding - Rs. 9 Lakhs
Joint Holding - Rs. 15 Lakhs
Under Section 80C
  • Life insurance
    Insurance helps individuals meet a variety of financial goals of the individual and his family. All types of life insurance plans including endowment, term, and moneyback qualify for tax benefits on entry and redemption.

    Here are some ways insurance can help achieve life stage goals:

    1. Financial cover against loss of life, which helps the family cope financially in the breadwinner’s absence

    2. Child Education

    3. Child Marriage

    4. Buying a House

    Maximum annual investment: Rs 1,50,000 (Rs 1.5 lakhs)

    Tax benefit: Under Section 80C and Section 10(D)

    Investments in ULIPs (unit-linked plans) are another way for individuals to achieve financial goals the tax-free way. ULIPs are linked to markets and more suitable for investors with a medium to high risk profile.

    Tax benefits on ULIPs are similar to those offered on other life insurance plans as per tax structure in India.

  • Public Provident Fund (PPF)
    PPF is a government-sponsored savings and retirement planning investment. It is beneficial for individuals without a structured pension plan.

    The interest rate on the PPF is linked to the debt market. Money is locked in for a period of 15 years, although partial withdrawals are permitted, the earliest one being after the sixth year. Redemption proceeds are tax-free in the hands of investors.

    Maximum annual investment: Rs 1,50,000 (Rs 1.5 lakhs)

    Tax benefit: Under Section 80C and Section 10(D)

  • New Pension Scheme (NPS)
    Regulated by the Pension Funds Regulatory and Development Authority or the PFRDA, the New Pension Scheme (NPS) is specifically designed to help individuals save for retirement.

    Any citizen of India in the 18 – 60 years age bracket can participate in it. It is cost effective since fund management charges are low. Money is managed in three separate accounts having distinct asset profiles viz. Equity (E), Corporate bonds (C) and Government securities (G). Investors can choose to manage their portfolio actively (active choice) or passively (auto choice).

    Given the varied options, NPS is beneficial for individuals, with varying risk appetites, looking to set aside money towards retirement.

    Maximum annual investment: Rs 1,50,000 (Rs 1 lakh)

    Tax benefit: Under Section 80CCD

    The aggregate limit of deduction under all the sub-sections of Section 80C, like 80CCD, 80CCC cannot exceed Rs 1.5 lakhs.

  • Pension
    Pension is a form of life insurance that provides for a different need. While protection plans (like term plans) are geared to financially secure the individual’s family on death, pension plans aim at providing for the individual and his family if he lives on.

    Maximum annual contribution: Rs 1,50,000

    Tax benefit: Under Section 80CCC

    The aggregate limit of deduction under all the sub-sections of Section 80C, like 80CCD, 80CCC cannot exceed Rs 1.5 lakhs.

  • Deposits
    The 5-year tax-saving bank fixed deposits as also post-office time deposits offer tax free income. They are ideal for individuals with low risk appetite looking to save money over the long-term.

    Maximum annual investment: Rs 1,50,000 (Rs 1.5 lakhs)

    Tax benefit: Under Section 80C

  • Senior Citizens Saving Scheme (SCSS)
    The SCSS is a government-sponsored scheme to offer financial security to senior citizens. Individuals over 60 years of age are eligible to invest in the scheme. Investors can make a one-time deposit under subject to the minimum investment amount of Rs 1,000 and a maximum of Rs 15 lakhs (in case of joint holding) and Rs 9 lakhs (single). The lock-in is for 5 years offering interest payable on a quarterly basis with the interest being taxable in the year of accrual and subject to tax deduction at source.

    Tax benefit: Under Section 80C

 

Featured Articles
Popular Posts

Products offered by HDFC Life :

HOW CAN WE HELP YOU

HELP TO BUY ONLINE
Call us

All days 10 AM to 7 PM

Let us call you
Call Us

Mon-Sat 9:30 A.M to 6:30 P.M

Locate A Branch Near You
Call Us

Mon-Sat 10 am to 7 pm(Local Charges Applicable.) (DO NOT prefix any country code e.g. +91 or 00.)

Email
nriservice@hdfclife.com

(For NRI customer only)

Stay updated with HDFC Life

ISO 27001 Information Security management System Certified by British Standards