It is always a good feeling to earn and use the earnings to cover regular expenses and live a comfortable life. However, if you are an earning individual and earn above Rs. 2.5 lakh in a financial year, the Indian government holds you liable to pay tax on the income above this threshold. Although filing regular income tax returns is ideal for creating a financial identity, paying unnecessary taxes, which you can avoid, can result in lower savings over time. The Indian government and the Income Tax Department allow taxpayers to claim tax deductions on certain investments and expenses to lower their taxable income. With a reduction in your taxable income, you end up paying a lower tax amount, thereby increasing your savings.
 

If you are an earning individual and are liable to pay taxes, it is important to know about tax-saving instruments. This blog will help you understand the best tax-saving instruments in 2024 to help you save tax and increase your savings.
 

If you are looking for a safe investment option, you can consider fixed deposit. They offer guaranteed returns and a fixed interest rate throughout your investment tenure.

• Tax-saving instruments are financial products that allow individuals to reduce their taxable income, lowering their tax liability.
• Investments or expenses for tax-saving instruments are eligible for tax deductions under various sections of the Income Tax Act 1961.
• You can choose from numerous tax-saving investments to claim the section limit and reduce your taxable income.

Tax-saving instruments are investment investments or schemes designed to help legally reduce their taxable income while encouraging long-term savings and investments. These instruments offer tax deductions or exemptions under various sections of tax laws, most commonly under section 80C of the Income Tax Act in India, which allows a deduction of up to Rs. 1.5 lakh from taxable income. Using these investments, investors can claim tax deductions while filing their ITR to pay a lower tax amount.

Here are some of the best tax-saving investment options in 2024 that can allow you to lower your taxable income:
 

Public Provident Fund (PPF)

PPF is a long-term savings scheme backed by the Indian government. It has a lock-in period of 15 years. Under section 80C, you can claim the amount you contribute to PPF as a tax deduction up to Rs. 1.5 lakh.
 

Equity-Linked Savings Scheme (ELSS)

ELSS is a type of mutual fund that primarily invests in equities to earn higher returns. It offers the shortest lock-in period of 3 years among all section 80C options and allows tax deductions up to Rs. 1.5 lakh on the contribution amount.
 

National Pension Scheme (NPS)

It is a retirement scheme backed by the Indian government that provides regular interest to account holders. Under section 80C, you can claim a tax deduction up to Rs. 1.5 lakh on the contributions made to NPS.
 

Tax-Saving Fixed Deposits (FDs)

These are designed to offer fixed returns over the maturity period but also come with tax benefits. The investment amount in such FDs is tax-exempted under section 80C up to Rs. 1.5 lakh.
 

Sukanya Samriddhi Yojana (SSY)

It is an investment scheme offered by the Indian government for parents of a single girl child. It offers one of the highest interest rates among small savings schemes and allows parents to claim tax deductions up to Rs. 1.5 lakh on the contributed amount under section 80C.
 

Life insurance premiums

Premiums paid for life insurance policies, such as endowment or term plans, are eligible for tax deductions under section 80C up to Rs. 1.5 lakh. This also includes unit-linked insurance plans (ULIPs) that provide investment and insurance benefits.
 

Employee Provident Funds (EPF)

EPF is a retirement savings scheme for salaried employees, where both the employee and employer contribute a portion of the salary. Employee contributions up to Rs. 1.5 lakh are eligible for deductions under section 80C.
 

You can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.60% p.a.

Paying high taxes every year can reduce your savings as you have to pay a portion of the earnings as tax while filing the ITR. However, there are numerous tax-saving instruments allowed by the Indian government and the Income Tax Department, which can allow you to lower your taxable income by claiming a tax deduction. You can contribute to these tax-saving instruments every year to claim tax deductions and save a higher amount by paying lower taxes. Now that you know the best tax-saving instruments in 2024, you can analyse all of them to choose the most suitable ones.