Best Tax Saving Investment Options In India

To save on taxes, you can explore various tax saving investments. These avenues can offer deductions under the Income Tax Act of 1961. You can choose from several schemes under the following sections:

• 10D
• 80C
• 80D
• 80CCD (1B)
• 24(b)
• 80TTA/ 80TTB

To know more about these tax saving instruments, read on.    

Top 5 Investments for Tax Savings in India

Here are some tax saving investments you can rely on: 

Unit-Linked Insurance Plans (ULIPs)

• These plans allow you to get exemptions of up to ₹1.5 lakhs under Sections 80D and 80C
• ULIPs have a lock-in period of 5 years
• Withdrawing or getting maturity amounts is also free from taxes
• ULIPs offer you the probability of earning good returns by investing your corpus across debt and equity
• You can also reduce your exposure to risk by allowing you to choose between fixed-income and equity funds
• You can also take advantage of riders related to critical illness and accidents

Also Read Tax-Free Allowances

National Savings Certificate (NSC)

• NSC is beneficial for debt investments with tax benefits
• This scheme is considered to be the best for small-income as well as mid-income investors
• This bond investment also allows you to save up to ₹1.5 lakhs of income tax under Section 80C, while offering a fixed-income return
• The current interest rate for NSC is 7.7% per annum
• You can start investing with ₹1,000 and for a fixed duration of 5 years

Tax-Saving Fixed Deposit

• These are a popular choice for risk-averse investors because they are not influenced by market conditions
• You can enjoy deductions of up to ₹1.5 lakhs under Section 80C
• The investment horizon is fixed for a 5-year period, just like NSC
• The rate of interest on these FDs ranges between 5.5% – 7.75% p.a. depending on the institutions
• Most FD issuers also offer higher rates to senior citizens

Also Read SBI FD rates 2023

Equity-Linked Savings Scheme (ELSS)

• These are investments with maximum exposure toward equity-based securities
• These have a lock-in of 3 years
• You can invest a lump sum amount or through a systematic investment plan (SIP) in an ELSS fund
• You can claim exemptions of up to ₹1.5 lakhs on your taxable income u/s 80C
• The returns on this scheme are market-linked and can fluctuate regularly 
• You also have the option to earn high returns in comparison to fixed-income options

Public Provident Fund (PPF)

• This is a government-backed small savings scheme to help you save tax
• It is a debt scheme with a tenure of 15 years
• You earn fixed returns and the government revises the rates every quarter 
• It allows you to claim tax deductions of up to ₹1.5 lakhs in a financial year
• The interest that you earn on your PPF investment is entirely free from taxation

Comparison of Various Tax Saving Instruments

Check out this table for a quick comparison of various tax-saving investments:

Instrument	Lock-in/Maturity Period	Tax Exemption	Return on Investment
Unit-Linked Insurance Plans (ULIPs)	5 years	₹1.5 lakhs on principal and premium	Fixed (depends upon the interest set by the government)
National Savings Certificate (NSC)	5 years	₹1.5 lakhs on principal	Fixed (depends upon the interest set by the government)
Tax-Saving Fixed Deposits	5 years	₹1.5 lakhs on principal	Fixed (depends upon the interest set by the concerned financial institution)
Equity-linked Savings Scheme (ELSS)	3 years	₹1.5 lakhs on principal	Depends on the market
Public Provident Fund (PPF)	15 years	₹1.5 lakhs on principal	Fixed (depends upon the interest set by the government)

Want to upgrade your lifestyle but have funds tied up in tax saving investments? Think before you withdraw from such schemes. After all, your future is as important as your present.

Also Read: How to save income tax on salary

Fibe can help you cover additional expenses with an Instant Personal Loan of up to ₹5 lakhs easily and affordably. So, you can keep your investment secure without compromising on your needs. Get the loan at affordable rates in minutes by downloading our Personal Loan App or by logging in to our website. 

FAQs on Tax-Saving Investment Options

Where to invest for tax savings?

You have multiple options if you wish to park your funds in tax saving investments. These include: 

• NPS
• Tax-Saving FDs
• NSC
• ELSS
• PPF
• ULIPs

How to save taxes in India?

Investing in tax-saving options allows you to avail of tax deductions under:

• 80C
• 80D
• 80CCD (1B)
• 24(b)
• 80TTA/ 80TTB
• 10 (10D) 

How much investment is needed to save tax?

The minimum investment depends on the scheme you choose. For instance, you need to invest at least ₹500 in NPS and PPF.

How can I save 100% income tax?

Here is how you can save cent percent of your tax liabilities:

• If your earnings are up to ₹2.5 lakhs or ₹3 lakhs a year, you do not have to pay any tax under the old and new tax regimes, respectively
• You can also get a tax rebate if your annual income is up to ₹5 lakhs or ₹7 lakhs under old and new tax regimes, respectively
• You can use the standard deduction as well as deductions under 80C, 80CCD, 80D and 24(b) to save 100% on taxes if your income is higher

What is an 80D tax-saving plan?

You can claim deductions u/s 80D of the IT Act on:

• Medical bill payments
• Payment of health insurance premiums

Here are the maximum deductions:

• Up to ₹25,000 paid for spouse, dependent children, self or parents
• Up to ₹50,000 if family or parents are senior citizens

Sources:
https://www.nsiindia.gov.in/