Here is the list of 10 best investments for tax saving.

1. Public Provident Fund (PPF):

  • The Public Provident Fund can be opened with a bank or post office.
  • Taxpayers can claim a deduction under section 80C of the income tax act for the amount invested by them during the financial year. The maximum amount eligible for deduction is Rs. 1.5 lakhs.
  • PPF account comes with a lock-in period of 15 years.
  • PPF allows 2 options to the investors at the end of the maturity period either withdrawal of proceeds from the account or continue for another 5 years.
  • Amount invested during the year in this plan qualifies for deduction from income maximum upto Rs. 1.5 lakhs.
  • Interest earned during the year is exempt.
  • Maturity amount received is exempt.

2. Sukanya Samridhi Yojana (SSY):

  • The scheme allows a fixed income investment through which the taxpayer can invest regular deposits and at the same time earn interest on it.
  • Investing in Sukanya Samriddhi Yojana also qualifies as an eligible deduction under section 80C of the income tax act.
  • The government of India determines the rate of interest on the scheme on a quarterly basis and is payable on maturity.
  • You have to invest at least Rs. 250 every year for up to 15 years from the date of account opening. Thereafter the account will continue to earn interest till maturity even if no deposits are made into it.
  • Failure to pay the minimum amount in a year will lead to disconnection of the account. To re-activated the account, you need to pay a penalty of Rs. 50 along with the original Rs. 250 deposits.
  • The scheme comes with a maturity period of 21 years or until the girl child marries after the age of 18.
  • Only girl children can claim the benefits of this scheme.
  • The girl child cannot be more than 10 years of age.
  • Only two SSY accounts are allowed for a family.
  • The investor must submit age proof of the daughter.
  • Amount invested during the year in this plan qualifies for deduction from income maximum upto Rs. 1.5 lakhs.
  • Interest earned during the year is exempt.
  • Maturity amount received is exempt.

3. Tax-savings fixed deposit:

  • Fixed deposits are considered one of the safest tax savings schemes. It’s safer than equity investments in terms of risk and returns.
  • Investment in tax saver fixed deposit eligible for deduction under section 80C while calculating the taxable income.
  • A minimum lock-in period of 5 years.
  • The Senior citizens can get a higher interest rate on investment
  • In the case of a joint account, the primary holder can avail the benefit of tax deduction while calculating the taxable income.
  • Tax saver fixed deposits do not allow any premature withdrawal. The terms and conditions for premature withdrawal vary from bank to bank.
  • Amount invested during the year in this plan qualifies for deduction from income maximum upto Rs. 1.5 lakhs.
  • Interest earned during the year is taxable.
  • Maturity amount received is exempt.


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4. National Savings Certificate:

  • A government of India initiative, a national savings certificate is a fixed income investment scheme that aims at the small and middle-income investors to invest and earn handsome returns. It is considered a low-risk investment and as secure as the Provident Fund.
  • Apart from providing the benefit of tax exemption, it provides the investor with complete capital protection and guaranteed interest.
  • It gives 6.8% annual interest as a guaranteed return.
  • You can invest minimum Rs. 1,000 (or excess in multiples of Rs. 100).
  • The maturity period of NSC is 5 years.
  • An early exit is not available.
  • You can use the same as collateral security in case of loans from Bank or NBFC.
  • Amount invested during the year in this plan qualifies for deduction from income maximum upto Rs. 1.5 lakhs.
  • Interest earned during the year is reinvested and qualifies for deduction from income.
  • Maturity amount received is taxable.

5. Equity Linked Savings Schemes (ELSS) Mutual Funds:

  • Equity Linked Savings Schemes are mutual fund investment schemes that invest a large percentage of their portfolio in equity.
  • The fund has a mandatory lock-in period of 3 years which is the shortest amongst all the investment products.
  • Investment in ELSS funds qualifies for deduction under section 80C of the income tax act up to a maximum of Rs. 1.5 lakh.
  • Both lump sum investment and the amount invested through a systematic investment plan (SIP) qualifies for the deduction.
  • Since ELSS funds invest a large amount in equity, there is always some inherent risk.
  • ELSS funds provide the dual benefit of capital appreciation and tax-savings.
  • Amount invested during the year in this plan qualifies for deduction from income maximum upto Rs. 1.5 lakhs.
  • Dividend received during the year is taxable.
  • Capital gains on maturity is exempt upto Rs. 1 lakh.

6. Unit Linked Insurance Plan (ULIP):

  • It ensures that one’s family is financially balanced in the case of an event of death.
  • Under section 80C of the income tax act 1961, the premium paid towards the purchase of a life insurance policy qualifies for deduction up to Rs. 1.5 lakh.
  • Furthermore, as per section 10(10D) income on the maturity of the policy is tax free.
  • The income is tax-free if the premium is not more than 10% of the sum assured.
  • In the case wherein the money goes to the nominee’s of the person insured, the same remains as a tax exemption in the hands of the nominee.
  • In terms of the deduction under section 80C 1961:
    • The policy is in his own name or in the name of their spouse or child.
    • The taxpayer can claim 20% of tax deduction on the premium paid if the taxpayer purchases a life insurance policy on or before 31st March 2012.
    • If the life insurance policy is purchased after 1st April 2012, then the premium paid is eligible for tax deduction up to 10% of the sum assured.
  • Amount invested during the year in this plan qualifies for deduction from income maximum upto Rs. 1.5 lakhs.
  • Maturity amount received is exempt if the amount of premium for all of the years during the term of the policy does not exceed Rs 2.5 lakhs.


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7. School Tuition Fees:

  • The income tax act 1961 provides a deduction under section 80C of the income tax act for payment for school fees of children.
  • Tuition fees paid to any registered university, college, school, or educational institution qualifies for deduction up to Rs. 1.5 lakh.
  • Moreover, only the tuition fees qualify for deduction under the income tax act. Any other fee like donation, development fee, etc. even if paid to such an institution does not qualify for the deduction.
  • The income tax act allows both the parents to claim the deduction to the extent of the amount paid by them.

8. National Pension Scheme (NPS):

  • National Pension Scheme is a tax saving option that is available to both government and private employees.
  • It enables the depositor to build a corpus for their retirement along with a regular monthly income.
  • The amount invested by the depositor is invested in several schemes including the equity markets.
  • As per the provision of section 80CCD, an individual can claim a deduction up to Rs. 1.5 lakh by investing in NPS.
  • There are two types of NPS accounts; Tier-1 & Tier-2.
  • A tier-1 account has a lock-in period until the subscriber reaches the age of 60 years.
  • The contributions made by the subscriber to tier-1 are tax-deductible under section 80CCD(1) and 80CCD(1B).
  • Tier-2 accounts are voluntary in nature which allows the subscriber to withdraw the money when they like.
  • However, contributions under tier-2 accounts are not eligible for a tax deduction.
  • Amount invested during the year in this plan qualifies for deduction from income maximum upto Rs. 1.5 lakhs.
  • Income earned during the year is exempt.
  • Maturity amount received is 60% exempt and the remaining 40% is taxable.

9. Senior Citizen Savings Scheme:

  • A Senior Citizen Savings Scheme is an income tax saving schemes available to senior citizens who are residents in India.
  • The scheme is available for investment through banks and post offices and offers one of the highest rates amongst the various savings schemes.
  • Depositors can make an investment with a minimum amount of Rs. 1000 and in multiples thereof.
  • The scheme also provides the facility of investment through cash provided the investment amount is less than Rs. 1 lakh.
  • The deposits made into the scheme matures after a period of 5 years.
  • The depositors also have the option to further extend the maturity period by another 3 years.
  • Deposits made into a Senior Citizens Savings Scheme account are compounded and paid out annually.
  • Amount invested during the year in this plan qualifies for deduction from income maximum upto Rs. 1.5 lakhs.
  • Interest earned during the year is exempt upto Rs. 50,000.
  • Maturity amount received is taxable.


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10. Health Insurance premium under section 80D:

  • You can claim a tax benefit up to Rs. 25,000 (Rs. 50,000 in case of more than 60 years of age) in respect of the premium paid to keep in force health insurance covering self, spouse, or dependent children.
  • Apart from the above, an additional deduction for the insurance of the parents is available to the extent of Rs. 25,000 if they are less than 60 years of age or Rs. 50,000 if they are more than 60 years of age.
  • If the individual and the parent are both above 60 years of age, the maximum deduction available under this section will be Rs. 1,00,000. 



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