How to save taxes by investing

Personal Finance
1

There are several ways for an Indian investor to save on taxes by investing. Some potential strategies include:

  1. Investing in tax-saving instruments such as Equity-Linked Savings Schemes (ELSS) or tax-saving fixed deposits, which offer tax deductions under section 80C of the Income Tax Act. This section allows individuals to claim a tax deduction of up to INR 1.5 lakhs on their taxable income by investing in certain eligible instruments, including mutual funds and Sovereign Gold Bonds.

  2. Investing in tax-free instruments such as certain types of government bonds, which are exempt from tax on the interest earned.

  3. Investing in pension schemes, which offer tax benefits on the contributions made and the returns earned. By investing in the National Pension System (NPS) you can take advantage of the tax deductions available under section 80CCD(1B) of the Income Tax Act. Individuals can claim an additional deduction of up to INR 50,000 under section 80CCD(1B) for contributions made to the NPS.