Top 5 income tax saving options with low or no lock-in periods
While many popular investment instruments such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS) among others require long term commitments, several provide quick liquidity, lower risk and efficient Section 80C or other related deductions, thus making them ideal for those aspiring to prioritise financial flexibility.
Keeping the same factors in mind below are five tax saving options that investors can avail without decadal or very long lock in periods and ensure that they are able to save money smartly.
Several banking institutions provide 5 year tax saving fixed deposits (FDs) under Section 80C. Given these fixed deposits do have a five year lock in period, still they also provide premature liquidity in emergencies through a personal loan or overdraft, unlike PPF or NPS. Do keep in mind, the interest earned on such deposits is taxable, but the principal invested qualifies for deduction up to ₹ 1.5 lakh.
Health insurance continues to be a reputable tax saving recommendation by banking institutions and financial advisors. Premiums of up to ₹ 25,000 ( ₹ 50,000 in case of senior citizens) are deductible under Section 80D. It is also important to note that there is no lock in and deductions can be claimed every year upon renewal, making it one of the most lucrative and flexible options.
For salaried individuals, all contributions made to the Employee Provident Fund (EPF) automatically qualify for Section 80C deductions. Though EPF has a retirement oriented vision and structure, still partial withdrawals are permitted for marriage, education, home ownership and medical emergencies such as serious surgeries and procedures. Thus providing partial liquidity without breaking the investment.
The repayment of home loan principal amount qualifies under Section 80C. The interest up to ₹ 2 lakhs is deductible under Section 24(b). There's no fixed lock in and deductions can be claimed yearly throughout the tenure of the home loan. It remains one of the most utilised tax saving strategies for home owners.
National Pension System (NPS) provides deductions under Section 80CCD(1B) of up to ₹ 50,000 over and above the deduction provided under Section 80C. Though tier I is long term, tier II accounts offer flexible withdrawals. Do keep in mind that tier II is tax exempt only for government employees. Withdrawal of partial amounts are also permitted after three years under specific terms and conditions.
Disclaimer: This article is for informational purposes only and should not be considered financial or tax advice. Please consult a qualified tax advisor or financial planner before making any investment or tax-saving decisions.
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When it comes to a joint home loan, it's certainly better than taking it individually.'He adds, 'By merging incomes, it increases loan eligibility, enabling you to substantially increase your budget.'Backing this, Sahil Agarwal, CEO, Nimbus Realty, says, 'For young couples planning to buy a home together, a joint home loan often makes a lot more sense than turning to a personal loan. The interest rates are lower, tenures are longer, and there are tax perks that both partners can avail.'Joint home loans usually have lower interest rates than personal loans. Home loan rates in India today hover around 8–9% per year, while personal loans can easily touch 16% or REPAYMENT, EASIER EMISAnother huge plus of joint home loans is the repayment period. Home loans can stretch up to 20–30 years, which keeps the monthly EMI affordable. Personal loans, in contrast, usually need to be paid off within 1–5 years, making the monthly instalments much explains, 'EMIs are comparatively inexpensive with home loans because they have longer payback terms of up to 30 years. Personal loans, on the other hand, have shorter terms, which means that monthly payments are higher and the total interest load is larger.'DOUBLE TAX SAVINGSJoint home loans bring in another big win, tax benefits. Both partners can claim tax deductions of up to Rs 1.5 lakh each on the principal repayment under Section 80C, and up to Rs 2 lakh each on interest under Section 24(b). This can add up to handsome savings every year.'Both co-applicants are eligible to claim deductions... which maximises the family's total tax savings,' Arora A PERSONAL LOAN MIGHT HELPWhile a home loan is better for buying a house, a personal loan does have its place. 'When purchasing land or property that isn't qualified for a home loan, including unapproved plots or properties that are the subject of a legal battle, a personal loan might make more sense,' says adds, 'When rapid, collateral-free payments are required, it can also be used to cover registration fees, pay token amounts, or fill short-term liquidity shortfalls.'So, a personal loan can be a helpful short-term fix, but not a replacement for a proper home CREDIT SCORE MATTERS TOOOne important point young couples must remember is that a joint home loan affects both partners' credit scores. Make your payments on time and both scores improve. Miss EMIs and both partners' scores take a also impacts future borrowing power until the loan is cleared or well-serviced. 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It's your money, your home, and your peace of mind.- Ends
