Tax saving investments you should know

The tax saving season commences on April 1. Whether you are salaried or non-salaried, as a taxpayer, you would love to explore the schemes that can help you make a saving on tax. Investors, too, are looking for good options that can help them save tax and generate income free from tax. When you choose a tax saver scheme, you need to consider factors like liquidity of returns, safety and have a good knowledge of the taxation policies on the returns. In case the returns are taxes, your benefits will be lower, as compared to tax-saving schemes.

 You should remember that the income is liable to be taxed in case you go for the Senior Citizens' Savings Scheme (SCSS), National Savings Certificate (NSC), and other schemes and deposits with post offices and banks. In these cases, you can generate interest in the present year. However, in the subsequent years, paying the tax remain a liability.

Here are some strategies that can help you save tax.

Traditional insurance schemes

Traditional insurance schemes may be a whole-life plan, money-back scheme or an endowment. They are different from pure term insurance plans, as they can help the investors save money. As a result, you can get a fixed assured sum. The premium is decided after considering the age of the applicant at the time of entry. Other factors that are considered at this stage include the period of coverage and life coverage. Till maturity, the premiums need to be paid every year. Some of these plans come with an option for limited premium payment. Therefore, you need to pay the premium for a specific term, but the policy continues longer.In these cases, the premium is free from tax as per section 80C. The death benefits and maturity value are free from tax.

 Unit linked insurance plans (ULIP)

ULIP is a hybrid product, that brings you a combination of savings and protection. It offers life insurance, while helping you channelize the savings into assets that are linked to the market. This can help you meet the long-term goals. In most of these schemes, you will come across five to nine fund options, where the asset allocation between debt and equity varies. The duration of a ULIP scheme may vary between 15 to 20 years. On the existing policy, the fund value remains tax-free on maturity. This is allowed after five years. In case you switch between the options of the fund, you will be exempted from tax, regardless of the holding period.

Other popular options for saving tax are public provident fund and the employee’s provident fund. When you go for these schemes, you can save tax in the coming years. At the same time, you can grow your assets.