Efficient tax planning not only helps you save money but also helps in investing in instruments that yield good returns. Planning well ahead is critical for individuals who are taxed at a high rate.
This exercise helps them select avenues that not only provide tax relief but also helps build wealth and retirement income. Making last-minute hasty investments is not always judicious.
Instruments under Section 80C
Under Section 80C of the Income Tax Act, certain investments are deductible up to a maximum of Rs 1 lakh from your gross total income.
For risk-averse investors: Investments in PPF, NSC, NABARD bonds, Employee Provident Fund, Senior Citizen Savings Scheme, tax-saving fixed deposits and infrastructure bonds help save tax. These fixed income schemes are for the risk-averse individuals who are more inclined to protect their capital. While investors cannot expect windfalls like in the stock markets, these investments are free of volatility.
However, investors must be cautious of the inflation risk attached to fixed return investments.
Planning ahead helps you reduce your tax liability and discover opportunities to build wealth.
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