The most troublesome job for a career is when its hard-earned income is taxed. People resort to various types of investments to avoid tax, but there are only a few investment options that provide tax-free income in India. Most popular investment options such as fixed deposits and mutual funds are taxed on returns. In addition, capital gains from investing in shares are also taxed. Yet there are some investment options that provide tax free income. It is very important to know the possibilities of tax benefits before investing. If you want to get more returns then you have to know the options that give tax free returns. So through this article, we are going to give you information about tax free investment options and the returns that can be made, which will make it easier for you to choose a better option for you.
Public/The people Provident Fund (PPF)
PPF is one of the best options to save tax. PPF is considered an excellent investment to get tax free income. A tax rebate of up to Rs 1.5 lakh a year is available under Section 80C of the Income Tax Act for investing in PPF. PPF is government supported, so the principal amount and interest are also guaranteed by investing in it. PPF was providing interest at the rate of 7.9% for the October to December 2019 quarter. PPF has a lock-in period of 15 years. In addition, it provides higher returns than fixed deposits. PPF investment provides tax benefits under the EEE tax regime. Interest earned through investment in PPF and the amount withdrawn on maturity is tax free.
It is an excellent long-term investment option for retirement. It pays interest at a high rate and is a very safe investment. It has a long lock-in period, so invest in it only if you are a long-term investor. It provides tax benefits as well as social security.
Sukanya Samriddhi Yojana for the future of the girl child
Sukanya Samriddhi Yojana (SSY) is an excellent scheme for education, marriage and financial independence of girls. It is a government-supported scheme under the ‘Beti Bachao-Beti Padhao’ campaign. The purpose of this scheme is to help parents invest in grooming the future of girls. You can open SSY account in any public and private sector banks or even post office as savings account in the name of your girl child.
- Only parents or legal guardians can open an SSY account in the name of the girl child.
- The girl’s age should be less than 10 years of age at the time of opening an SSY account. The account remains operational till the girl turns 21.
- SSY account can be opened from Rs 250 only. A maximum of Rs 1.5 lakh can be deposited in a year.
- Only two SSY accounts are allowed to be opened per family. More than one SSY account cannot be opened for the same girl.
Interest on SSY accounts – Sukanya Samriddhi Account was providing interest at the rate of 8.4% for the October to December 2019 quarter.
tax benefit – Investing in SSY provides tax benefits under Section 80C of the Income Tax Act. Investing in it gives tax benefit on the principal amount invested. In addition, the interest and maturity amount earned is tax free.
Voluntary provident fund (VPF)
Voluntary Provident Fund (VPF) is a scheme that comes under the traditional provident fund savings scheme. You can invest in the VPF scheme by fixing a fixed contribution amount on a monthly basis.
- It is a safe investment.
- Transfer is easy in case of change of job.
- Opening a VPF account is easy.
- Interest at the rate of 8.65%.
Any employee can contribute to provident fund on a voluntary basis. Employers are not required to contribute for VPF. The interest rate of VPF is the same as that of EPF. It has a lock-in period of 5 years. The VPF interest rate is fixed by the Government of India.
Tax benefit in VPF
VPF is one of the best tax saving instruments. Investing in it provides tax benefits under the EEE system. You can get tax benefits under Section 80C of Income Tax Act by investing in it. The interest earned and the amount withdrawn are tax free. VPF is currently providing interest at the rate of 8.65%. It is a good investment option for investors seeking to get good returns through safe investment without risk.