Best ways to save income tax: 10 tax-saving investment options for you
A taxpayer who finds himself in the new regime can switch to the old tax regime at the time of filing tax returns. “However, taxpayers can claim deduction only if they make their tax-saving investments before 31 March,” says Sudhir Kaushik, CEO of tax filing portal TaxSpanner. com. The taxpayers who changed jobs during the year may not have been asked to submit proof of investments either. The new employer might not have taken into account the income from the previous job and would have calculated a lower tax. “They should also complete their tax-saving investments now,” says Kaushik.
Our annual ranking of tax-saving instruments helps such individuals make the right choices. We assessed 10 tax-saving options on eight key parameters—returns, safety, flexibility, liquidity, costs, transparency, ease of investment and taxability of income. Each parameter has equal weightage and the composite scores determine the place in the ranking.
NPS
RETURNS 8.16% in past five years
Lock-in: Till retirement
The additional deduction offered by the scheme is very useful for those with surplus funds.
The NPS continues to be the top tax-saver for the second year running. The NPS saves tax under three sections: contributions up to Rs.1.5 lakh can be claimed as deduction under Section 80C; there is an additional deduction of up to Rs.50,000 under Section 80CCD(1b); and if the employer puts up to 10% of the basic salary of the individual in the NPS, that amount is deductible under Section 80CCD(2).
Apart from tax deductions, the NPS has become more flexible and investor-friendly. The limit for equity allocation has been raised to 75%. Individuals can now change their asset mix up to four times in a year, and can invest in funds of
