The last date to complete the work of tax savings is fast approaching. You have to invest before March 31, 2023, which is an important time to choose the right investment option to save income tax.
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The last date to complete the work of tax savings is fast approaching. You have to invest before March 31, 2023, which is an important time to choose the right investment option to save income tax. If the person chooses the wrong tax saving option, then he can get trapped and may have to face losses in this.
keep these things in mind
Every tax saving option should be seen on certain parameters, so that it can be known whether it is the right option for you or not. In these things like return, safety, liquidity, holding period and taxation should be assessed. The investment option that meets these things is considered better.
For example, interest earned from Public Provident Fund (PPF) and maturity is exempt from tax. However, PPF has a lock-in period of 15 years, due to which there is a problem with liquidity. Such longer duration may work for some people. But it is not right for all people.
These options can come in handy
National Savings Certificate (NSC) or five year tax saving fixed deposit (with bank or post office) also comes with a lock in period of five years. Apart from this, there is no liquidity here and the interest earned is taxed. Since the holding period is not very long, many investors may be happy with a lock-in period of five years to avail tax benefits.
Equity Linked Savings Scheme (ELSS) Mutual Funds have the shortest lock-in period of three years. And capital gains are taxed at special rates. However, ELSS schemes invest in equity shares and are considered riskier than other tax saving options. Apart from this, there is no premature withdrawal facility during the lock-in of three years. However, people will save tax by investing in some of these options. But if the return is not tax free, then they may have to pay higher tax on the return or interest earned. In such cases, the post-tax returns would be less.
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