Investment serves two purposes – wealth creation and tax savings. More than wealth creation, tax saving drives most of us towards investment schemes. There are multiple investment options available in the market, helping individuals save on taxes and build wealth corpus.
Unfortunately, despite some progress, a large segment of people in the country are still not investing due to various reasons. Some face genuine challenges such as low income and lack of awareness about available financial products. Many, despite earning well, fail to start their investment journey. They too have their own set of reasons behind not subscribing to any saving instruments. At times, people come up with an argument that they will have to invest time to visit offices or branches of companies dealing in investment products and also they would be required to do too much paper work. But this is not the case any more as most of these products have removed the barrier of doing physical paper work. Most of the financial products, investment in which gets tax benefits under the old tax regime, can be bought online and offline both. Products like NPS, tax-saving FDs, ELSS, PPF, ULIPs and life insurance can be opened online, eliminating the need for agents or office visits.
Following are some of the popular tax-saving investment schemes that can be subscribed online without any physical paperwork:
National Pension System:
Go to the eNPS website. To open an NPS account, you must have an Aadhaar number linked with a registered mobile number. Your KYC process in NPS will be completed using Aadhaar through OTP authentication, which will be sent to your registered mobile number.
Your demographic details and photo will be fetched from the Aadhaar database and automatically populated in the online form. You are required to fill in all the mandatory details online to proceed with the account opening process.
As part of the registration process, you will need to upload your scanned signature. If you prefer to use a different photograph than the one obtained from Aadhaar, you can upload a scanned photograph. Additionally, you will be directed to a payment gateway to make the payment for your NPS account using debit/credit card or UPI/internet banking.
A tax exemption of Rs 1.5 lakh can be claimed on the employee’s and employer’s contribution towards the National Pension System (NPS). Under the Corporate NPS scheme, employees get additional tax benefits on investment routed through their employer.
Tax-saving bank fixed deposit:
Five-year tax-saving fixed deposit is the easiest online tax-saving investment instrument. A buyer just needs to have a KYC-compliant bank account and access to internet banking to open a tax-saving fixed deposit. Tax-saving FD subscribers get a benefit of tax deductions of up to Rs 1,50,000 under Section 80C of the Income Tax Act.
To invest, one can simply log in to his or her bank account and proceed from there. When making the investment, one needs to ensure that the auto-renewal option (unless desired) is not enabled, as this would automatically renew tax-saving bank fixed deposit for the next five years after maturity. Once the investment is made, premature withdrawal is not permitted with a tax-saving fixed deposit.
Equity Linked Savings Scheme
Investing in an Equity Linked Savings Scheme (ELSS) online is very simple and similar to investing in any other mutual fund scheme. You can download a fintech app and start investing money online in an ELSS scheme. Alternatively, you can use an Online Investment Services Account. Whether investing as a lump sum or via the SIP (systematic investment plan) route, ELSS offers a convenient tax-saving option. You can save up to Rs 1.5 lakh a year in taxes by investing in ELSS, which is covered under Section 80C of the Income Tax Act.
Public Provident Fund
You can open a PPF account with designated banks and post offices across the country. In addition to the offline account opening option, there is also the possibility to open a PPF account online. The investment tenure for PPF accounts is 15 years, with the option for indefinite extensions in blocks of 5 years after maturity.
To open a PPF account online, simply log into the bank’s portal or visit the branch with the required documents and make a deposit with a minimum amount of Rs 500. Deposits to a PPF account are tax-exempt up to a maximum of Rs 1.5 lakh in a fiscal year under Section 80C of the Income Tax Act.
Unit-linked Insurance Plans
Unit-linked insurance plans (ULIPs) too are avaialble online. To buy a ULIP plan, you need to visit the official website of the insurance provider and find a suitable plan that aligns with your insurance needs and financial objectives. A valid ID and address proof should be kept ready as these documents are needed for KYC purpose. Under Section 80C of the Income Tax Act, ULIPs get exempted from tax for an annual premium amount of up to Rs 1.5 lakh.
Life Insurance
You can buy a life insurance policy online, which comes with all the benefits provided in a policy bought offline through an insurance agent. In fact, if you buy a life insurance scheme online, you don’t have to worry about any physical paperwork. You also save on agent commissions. You may also get an additional discount on purchasing a policy direct from the insurance provider as the company saves on commission outgo to agents. You can claim deduction benefits up to Rs 1.5 lakh per annum under Section 80C on annual insurance premium paid.