For the average middle-class salaried employee, investments are a very scary concept and many people can actually lose their money while investing. However, with the introduction of mutual funds, small investors can put their money into a large market where the risk of losing money is fairly low. Investing in mutual funds is one of the ways in which a person can invest without the fear of losing too much money. Along with investing, there are certain tax saver mutual funds, which exempt investors from paying a certain portion of their income tax. There are several mutual funds available in the market, some giving better returns than others. While looking up on the different options available to you, it would be best to choose an option that allows for tax exemption. This way, investments not only help you earn money, they also help you save a certain amount of money.
Apart from mutual funds, there are certain other investments that also help in saving on taxes. A Public Provident Fund (PPF) is one of the ways in which people save on their taxes. With a maximum investment of one lakh per year, people can get a tax-free return at the rate of 8.80% per year. Fixed deposits are one of the simplest ways in which a person can invest their money, and it also allows for certain tax rebates. However, the amount would be on lock-down for a minimum of 5 years, and the interest earned on a fixed deposit would be taxable. Investing in life insurance and medical insurance is another way in which people can save on their taxes.
Tax saving funds may seem like a good idea in theory, but each investment or fund or policy comes with their own terms and conditions. Certain investments are required to be kept for a certain period of time to be able to get the taxation benefit, and there is also a maximum amount that can be invested in some policies to be able to avail of a tax benefit. Apart from mutual funds, insurance policies and fixed deposits, there are also National Saving Certificates (NSC), Post Office Time Deposit Schemes and Term Deposit Schemes from Government Companies, all of which have certain tax saving benefits. Always be sure to read how the policy works, as well as how you can save on tax while making such an investment before finalising where you want to put your money. All investments have a certain risk factor, so be sure to read all the policy details and make yourself aware of any risks before investing.