“When there is an income tax, the just man will pay more and the unjust less on the same amount of income.”-Plato.

Paying income tax is the responsibility of the citizens of India. But does everyone take it seriously? In common, individuals are perplexed or unaware of paying tax. Most of them confuse tax deductions as forceful take away of income. At the same time, others understand that paying income tax helps the government work for the development and betterment of society. The overall infrastructural development is due to the contribution of the common person paying taxes. 

The year 2021 has approached an end, and now individuals will explore different tax saving schemes and plans. However, if you also see the deadline of tax filing approaching fast, this will be a quick reference guide for you to save tax.

10 Best Income Tax Saving Schemes in India for 2022.

Here are the best income tax saving schemes in India that you can consider for the year 2022.

1. Unit Linked Investment Plans (ULIPs): Unit Linked Investment Plan is one of the tax-saving life insurance policies. It is a plan that gives you a dual benefit of investment and life cover. The plan ensures that the family receives the death benefit after the unfortunate death of the life insured. 

ULIP plans give you a tax benefit of Rs.1.5 lakhs under Section 80C of the Income Tax Act, 1961. Further, the policy gives you tax exemption under Section 10(10D) on the amount received on maturity. Moreover, the income is tax-free if the premium you paid is not more than 10% of the sum assured. 

2. Equity Linked Savings Scheme (ELSS): Equity Linked Savings Scheme is the only mutual fund eligible for tax deduction under Section 80C of Income Tax Act, 1961 up to a maximum of Rs.1.5 lakhs. ELSS invests your money in equity funds that come with a lock-in period of 3 years which is the shortest compared to other investment products.

As the amount is always invested in equity, the risk of returns under ELSS is higher. But thinking positively about ELSS, you benefit from investment gains and tax savings. Moreover, you can invest in ELSS for the long term to reap benefits.

3. Public Provident Fund (PPF)

Another popular tax saving scheme is the Public Provident Fund (PPF). Taxpayers are inclined to invest in PPF as the investment falls under exempt-exempt-exempt tax deductions. You can open a PPF account at a bank or a post office.

The amount invested by taxpayers throughout the financial year is eligible for tax deduction under section 80C of the Income Tax Act. Amounts up to Rs. 1.5 lakhs are available for deduction. In addition, the interest and maturity amounts are tax-free because PPF falls under tax exemption.

4. National Savings Certificate

A national savings certificate is a government of India programme. It attracts fixed-income investment from small and middle-income investors who want to invest and receive good returns. The Provident Fund is a low-risk investment that keeps your investment safe. Investors can invest according to their income and investment habits. NSC is eligible for a deduction of up to Rs. 1.50 lakh under section 80C of the Income Tax Act. The return on investment under NSC is 6.8%, and you can invest as low as Rs.1000/-. The amount of investment can increase at your convenience. An early exit is not available under the National Savings Certificate Scheme.

5. Tax Saving Fixed Deposit

One of the traditional and the safest means of investment considered by thousands is tax-saving fixed deposits. In terms of risk and return, it is less risky than equity investments. Interest rates are set by banks and are determined by several factors.

Investment in a tax saver fixed deposit is eligible for a deduction under section 80C. A fixed deposit has a minimum lock-in period of 5 years. But the investment tool is beneficial for senior citizens because they earn a higher rate of returns on it. Premature withdrawals are not permitted from tax-saving fixed deposits, and the rules vary from bank to bank.

6. Senior Citizens Savings Scheme (SCSS):

A Senior Citizen Savings Scheme is a tax-saving programme for senior citizens who live in India. The scheme, offered through banks and post offices, has one of the highest interest rates among the many savings schemes. 

Investments in the Senior Citizen Savings Scheme are eligible for a deduction of up to Rs. 1.5 lakh from taxable income under section 80C. If the interest on such deposits exceeds Rs. 50,000, it is completely taxable and eligible for a tax deduction. The money you put into a Senior Citizens Savings Scheme account is compounded and paid out yearly.

7. Health Insurance Premium:

Buy health insurance policies that give you tax deductions for the premium you pay. The tax benefit is applicable under Section 80D. Considering the rise in the cost of medical care, having a health insurance policy is the safest option. It keeps your savings safe.

The mediclaim premium paid for yourself that is eligible for tax deduction is Rs.25,000/-. If the parents are under the age of 60, an additional deduction of Rs. 25,000 is allowed, and if they are over 60, an additional deduction of Rs. 50,000 is available. The maximum deduction possible under this section is Rs. 1,000,000 if both the individual and the parent are over the age of 60.

8. National Pension Scheme:

The National Pension Scheme, or NPS, has grown in popularity as a way to save money on taxes. It’s a tax-saving alternative that both government and private employees can make use of. It allows the depositor to develop a retirement fund while also receiving a regular monthly income. The depositor’s money is invested in various schemes, including the stock market.

You can claim a deduction of up to Rs.1.5 lakhs under Section 80CCD.

9. Interest in Home Loan:

You can claim interest paid on a home loan paid for a tax deduction. Condition is that the home loan must be taken for the purchase or the construction of the house. The construction shall be completed within five years from the end of the financial year in which the loan was taken. The component of interest paid can be claimed as a deduction under Section 24 up to Rs.2 lakhs. 

10. Term Plan:

Term plan is the most affordable life insurance policy that provides you income tax benefits under Section 80C. The death benefit paid to the nominee is also eligible for tax exemption under Section 10(10D). This is one of the best tax saving life insurance policies that cover the life insured for a specific period. The nominee receives the death benefits if an insured dies during the policy term. Term Insurance is a pure protection policy that provides you life cover and tax benefits only if the premium is paid on time.

Conclusion

These are the income tax saving investment plans you can consider for the year 2022. Then, depending on your income and income tax deductions expected, you can choose the tax-saving scheme and best tax saving life insurance policies. Connect with your tax consultant if you are indecisive about schemes you should pick.