What is tax savings and how does it work?

Tax saving is the process of reducing the amount of taxes you owe to the government by utilizing tax deductions, exemptions, and credits. The Indian Income Tax Act provides various provisions that allow individuals and businesses to save on their tax liability.

There are various taxsaving instruments available under the Income Tax Act, which help individuals and businesses to reduce their taxable income, and hence their tax liability. For example, contributions made towards taxsaving instruments such as Public Provident Fund (PPF), National Savings Certificate (NSC), EquityLinked Saving Scheme (ELSS), and so on, can be claimed as tax deductions under Section 80C of the Income Tax Act.

By investing in taxsaving instruments, individuals can reduce their taxable income by the amount invested, and hence, save on taxes. However, it is important to note that taxsaving instruments come with certain limits, lockin periods, and other terms and conditions, which must be taken into account while investing.