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Know everything about Best Tax Saving Investments in India.

Tax Saving instruments lessen the burden on a taxpayer’s life. The government of India has processed numerous drives to create these tax saving instruments.

Investing in a Tax Saving instrument helps to reduce the tax liability when they show their Tax saving Investment certificate.

There are market risks with some of the Tax Saving Instruments and also if you are not doing it right then you won’t get good returns.

Let’s take a look at some of the Top Tax Saving Instruments.

Best Tax Saving Investments in India – List of Top Tax Saving Instruments

If you are a salaried or a non-salaried taxpayer of the country, then you should look for one of the Tax Saving Instruments provided below.

Best Tax Saving Investments in IndiaYou may likely save a lot from your tax-saving instruments and as well as get low tax deductions at the same time.

A lot of people are unaware of the benefits related to tax-saving instruments. They have very little or low knowledge and which is why they feel it will be risky or do no profit to them.

Under section 80c of the Income Tax Act of the Indian constitution, it is mentioned that, if a taxpayer does investments in the Tax saving schemes then they will get the benefit of up to Rs 1,50,000.

The Tax Saving Investments which will benefit you and save you from excessive Tax deduction are –

  • Equity Linked Saving Scheme (ELSS)
  • Public Provident Funds (PPF)
  • Senior Citizen Savings Scheme (SCSS)
  • Sukanya Samriddhi Yojna (SSY)
  • Fixed Deposit (FD)
  • National Pension Scheme (NPS)
  • National Savings Certificates (NSC)
  • Unit Linked Insurance Plans (ULIP)
  • Life Insurance Tax Saving Scheme

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    Equity Linked Savings Scheme (ELSS) – Best Tax Saving Investment

    ELSS or Equity Linked Savings Scheme is a Tax savings scheme provided by mutual funds of India.

    It is an equity scheme where the lock-in period is 3 years which is the shortest among other options presented in 80c.

    You can use the Systematic Investment Plan and Lump sum investment schemes to invest in Equity Linked Savings Scheme.

    Here you will get substantial profits and thus will get a market advantage. The ELSS scheme is trusted over by more than 4 million Indian citizens.

    If you do a full utilization of the 80c section of the constitution then you can save up to Rs 50,000 in taxes.

    If you are investing your funds in an ELSS scheme then you can use up to a max amount of Rs 1,50,000 in a year.

    This means if the principal amount you have invested in ELSS will be reduced from your Tax liabilities. This Principal amount has to be lower than Rs 1,50, 000 in a year.

    The Equity Linked Saving Scheme is considered as a liquid instrument as it has a comparatively less lock-in period.

    Public Provident Funds (PPF) – Top Tax Saving Investment

    Public Provident Fund, also known as PPF is a Tax Saving Scheme and also a savings instrument offered by the Indian Government.

    PPF also comes under the 80c section of the Income Tax Act and is considered to be one of the best Tax saving instruments as it is assured by the Government of India.

    PPF has 15 years lock-in period which may cause problems in liquidity but also have low risks associated with it.

    The interest rate on this Tax saving instrument may vary and is declared by the Central Government of India every quarter for a period.

    During this period the interest rate remains fixed and only subject to change from the next period onwards.

    Here also you can invest up to Rs One Lakh and fifty thousand during a financial year and the amount you invest in this scheme will be deducted from your tax liabilities.

    The interest you earn here is not taxable under any circumstances thus, making the PPF scheme one of the best tax-saving instruments provided by the Government of India.

    Senior Citizen Savings Scheme (SCSS) – Best Tax Saving Instruments in India

    The SCCS or Senior Citizen Savings Scheme is specifically designed for the Senior citizens of India.

    Citizens of India, who are of 60 years of age or above, can use this Tax saving instrument. Here also you can invest up to 15,00,000 Indian Rupees per year.

    This is not for all citizens as the name suggests but people aged above 55 years with voluntary retirement can also opt for this scheme.

    In some cases like in the defense sector, the age limit is 50 years. Government of India decides the interest rate here. This is why it has a stable return and low risks on investments.

    If you qualify the above points then you have to pay a deposit of 1000 rupees and then can start investing an amount up to 15 Lakh Indian rupees as a joint holder.

    The investment amount for a single holder is 9 lakh Indian rupees.

    Sukanya Samriddhi Yojna (SSY) – Top Tax Saving Schemes in India

    The government of India has always emphasized for a girl child and has started a lot of schemes likewise. One of the best schemes for the girl child and tax saving is the Sukanya Samriddhi Yojna.

    This Tax saving scheme is specifically for the single girl child. Here the deposits are smaller than other tax saving schemes.

    Sukanya Samriddhi Yojna offers an 8.5% interest rate on deposits and helps you to get tax relaxations. Here also, the max amount that can be invested per year is that of 1.5 Lakh Indian rupees.

    The interest generated along with the withdrawal value is not liable for a tax deduction.

    The main part of this scheme is that you can start investing once your girl child turns 10 years and can be closed once the girl child turns 21 years of age.

    You can invest low principal amounts of up to 250 rupees and can go up to 1.5 Lakh Indian rupees. This ensures the safety of the future of a girl child and also helps to save tax.

    Fixed Deposit (FD) – Best Tax Saving Investments under 80C

    The financing companies of India provide the Fix Deposit tax saver scheme. This is a scheme under section 80c of the Indian Tax Act of the Indian Constitution.

    Under this scheme, you will get a guaranteed return on investment. The maturity period here in some cases is 10 years and does not allow withdrawal before maturity.

    The maturity period for some of the plans is as low as 7 days even. However, there are schemes where you can earn the interest amount monthly, quarterly, or biennially on investment.

    This is a great investment for those who want liquidity as well as Tax Saving. There is no fixed interest rate of return and is the final decision of the bank where you are investing.

    The interest rates keep on changing and thus, you should clarify with a bank official before investing.

    Banks also offer different interest rate which strictly depends on the principal amount you want to invest.

    National Pension Scheme (NPS) – Top Tax Saving Schemes in India

    The age of retirement in India is that of 60 years and thus you might lose the cash flow which is being generated from your income.

    This might create a great set of problems in the retirement age if you don’t secure it with a Savings Scheme right now.

    The National Pension Scheme is one of the best tax saving and future securing investment schemes under the 80c section of the Indian Tax Act.

    The investors of this scheme get financial security from this scheme, especially after your retirement.

    Anyone can claim financial tax deductions of 1.5 Lakh Indian rupees. Employees and Employers can contribute to this scheme if the employee is a salaried individual.

    The deposit amount per month is 10% of the basic salary of the employee. This is the employee’s share.

    The employer also contributes towards the NPS which is also 10% of the basic salary of the individual. You can reinvest funds into other schemes from NPS.

    National Savings Certificates (NSC) – Best Tax Saving Instruments

    NSC or the National Savings Certificate is a bond generated between the investor and the government of India towards tax-saving investments and moderate savings.

    This is a fixed tax saving instrument and Postal Tax Saving System under India Post operates this investment instrument.

    The certificate ensures that your deposit towards this scheme is highly secure as assured by the Government of India.

    A mid-income investor is the best investor for this Tax Saving Scheme. This has guaranteed return and low risks on investment. If you want to opt for this scheme you need to be an adult or a minor or a trust.

    You can save up to 1.5 lakh Indian rupees in tax deduction per year as defined under the 80c section of the Indian tax act.

    Your interest amount and return amount are also tax free because the interest earned is compounded annually. No TDS is applicable on the maturity amount as well.

    Unit Linked Insurance Plans (ULIP) – Top Tax Saving Instruments under 80C

    Unit Linked Insurance plans or ULIP is one of the best Tax saving investments by Government of India. It guarantees you a high return on investment as well as provides good insurance policies.

    The main thing about this investment plan is that it helps you out with tax deductions. The updated policies include no administration charges and premium allocation fees.

    ULIP is best for the people who want better returns and does not have any problem with high lock-in periods.

    The investment return is tax free and the lock-in period for a ULIP plan is that of 5 years. The unit Linked investment plan has high flexibility as you have various options to choose from.

    The return of Investment here depends on the performance of funds in the market. If you opt for ULIP, then you have an option to switch between fund options up to 4 times annually.

    More information related to GST and Tax Planning

    Life Insurance Tax Saving Scheme – Best Tax Saving Options

    Life Insurance policies fall under the best Tax saving instruments. Government of India runs the Life Insurance Corporation.

    The Life Insurance scheme comes under section 10D and 80c of the Indian Tax Act. When you deposit in this type of scheme, you will get an insurance coverage amount equal to the policy amount.

    A person will get the policy amount after the maturity of the policy. In case of the death of the person, the family will get the maturity amount.

    Life Insurance provides insurance coverage so you should not only consider this as a Tax saving scheme.

    You will get tax exemptions on deposit amount, returns and other maturity amounts here. You can avail of a tax exemption of up to 1.5 Lakh Indian rupees.

    Conclusion – Best Tax Saving Investments

    The tax saving instruments offers huge relief to the taxpayers of India. As a taxpayer, you might not want to pay a huge amount of your hard earned income to the government.

    However, with an investment instrument, you can save tax as well as get a high guaranteed return on investment.

    The Indian Government offers these schemes and investment plans under section 80c of the Indian Tax Act.

    Thus, these investment plans have high security backup. The ELSS plan offers variable returns among the other investment plans.

    The mandatory maturity period is quite beneficial for visible profits. These investment plans are best if you plan early.

    However, there is no such thing as of late investments. However, you will get low returns on the latter than the former on the same principal amount.

    Best Tax Saving Investments FAQs

    Ques – Which is the Best Tax Saving Investments in India?

    Answer – Tax investments can produce major benefits to an individual when done right.  There are several tax investments which are low risked and have higher returns, which are – Equity Linked Saving Scheme (ELSS), Public Provident Funds (PPF), Senior Citizen Savings Scheme (SCSS), Fixed Deposit (FD) and also the National Pension Scheme (NPS).

    Ques – How much tax can be saved through Equity Linked Saving Scheme (ELSS)?

    Answer – Citizens can save as much as 1.5 lakhs Indian Rupees through the ELSS.  While citizens are also free to invest more than 1.5 lakhs in ELSS but the regular tax benefit cannot be availed on the investments that surpass the amount 1.5 lacs.

    Ques – Can we save tax by investing in Public Provident Funds (PPF)?

    Answer – The Public Provident Fund has an incredible 15 year lock in period which is carries very low risk and have considerably good amount of returns.  One of the major ways to save tax by investing in the PPF is that the interest here is not taxable.

    Ques – How Senior Citizen Savings Scheme (SCSS) can help saving tax?

    Answer – In order to benefit the senior citizens of the country government designed the Senior Citizen Savings Scheme. The government decides the interest rate while keeping the returns stable and the investments at a very low risk. Thus, that makes the SCSS one of the most fruitful investments.

    Ques – How Sukanya Samriddhi Yojna (SSY) helps in Tax saving?

    Answer – The SSY scheme supports the girl child and gives lucrative benefits for single girl child. The Sukanya Samriddhi Yojna works in a way that it offers an 8.5% interest rate on the deposits which help the beneficiary get tax leisure.

    Ques – Can Fixed Deposit (FD) investment help in Tax saving?

    Answer – Yes, the Fixed Deposit (FD) investment is considered as one of the best tax saving investment under 80C.  The FD investment is a great choice for those individuals who wish to have both liquidity as well as tax saving.  The interest rate for the FD keeps on changing, it depends on the principal amount which the individual invest, and thus a proper clarification with the bank officials is advised.

    Ques – Is NPS investment good option for Tax saving?

    Answer – The NPS is indeed one of those wonderful investment opportunities that does not just ensure tax savings but also leads an individual to a happy retirement life.  The individual have to deposit an amount of around 10% from the monthly salary under this investment.

    Ques – How ULIP can help in Tax deduction?

    Answer – Starting from lucrative returns to providing the best of insurance policies, ULIP is one of the best tax saving investments to choose.  One of the major benefit which ULIP provides is that the individual has the benefit to switch between funds  up to 4 times per year, when they feel that their choosen fund isn’t performing well in the market, making ULIP an profit-friendly investment.

    Ques – Is Life Insurance a better option for tax saving?

    Answer – What makes life insurance unique and lucrative is that they don’t just save an individual’s taxes but also cover their insurance. One can avail tax exemptions on the deposit amount, returns and maturity amounts in this very scheme.

    Ques – Is NSC a better option for tax saving?

    Answer – NSC provides the level of investment security which you cannot expect from other government created instruments. The NSC refers to a certificate that ensures that the beneficiary’s deposit amount is highly secure and assured by the government. NSC carries a very low risk and has a tax free interest amount and return amount.

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