5 best tax saving options for 2018
- alphamag
- Jul 21, 2018
- 2 min read
As you ease into the second financial quarter of 2018, it is time to build your investments portfolio to gain wealth and save tax.
The very purpose of investment is to make your money work for you even when you don’t. The most successful people around the world often reveal that their investments helped them build their wealth. You do not need a lucky charm or in-depth market knowledge to become a successful investor.
Consider the 5 best tax saving options for 2018 to create future wealth:
Fixed deposit. The most basic and safest investment option to try is the tax saving fixed deposit. It has the same fixed deposit features as ordinary deposits, however the tax saving fixed deposit has a minimum tenure of five years. You are already aware of the benefits of fixed deposits – a lump sum amount of money is deposited with the bank for a certain rate of interest for a certain tenure. At the end of the tenure, the deposit is returned to you with the interest payable on it. The biggest benefits of the fixed deposit are that the interest remains constant throughout the tenure, the interest earning on the tax saving fixed deposit is tax-free, and you can predict the growth of the investment.
Home loan. Taking a big loan to save taxes? It is not as counter-productive as you think. For one thing, the home loan gets you a property of your own. For another, you get tax benefits on the principal borrowing and the interest paid on the home loan. The principal gets tax benefits under Sec 80C while the interest gets tax benefits under Sec 24.
Market-linked investments. Another good way to make the most of your income for a secure future, is to invest it on the markets. Start with reputed mutual funds over a longer investment window. Discuss the SIP options available with your bank, and invest in leading funds with a mix of large-, mid- and small-cap funds to mitigate risk and increase the potential for returns.
PPF. The Public Provident Fund (PPF) is another good option to invest in. It is also one of the most affordable instruments – you can invest as little as Rs 500 per year. The investment matures in 15 years, though it allows partial withdrawal of funds after the seventh year has elapsed. It is popular among those who wish to have an investment option to their name without spending too heavily on it.
Insurance. Buying insurance is an investment for the family’s future, though its benefits cannot be measured tangibly year on year. However, with growing stresses and the increasing incidence of lifestyle and other diseases, it is important for you to secure your finances against the future shocks of a lost income, accidental disability that prevents you from working, a serious illness that requires expensive treatment, etc. You must buy a ULIP (Unit Linked Insurance Plan) that offers life coverage as well as market-linked growth, and health insurance.