With the financial year ending on March 31st, 2024, many individuals in India are looking for tax saving investments options to reduce their tax liability. Here are some popular Tax Saving Investments Options to consider:
7 Best Tax Saving Investments Options to Consider
Equity Linked Savings Scheme (ELSS)
- ELSS are mutual funds that invest a significant portion of their assets in equities.
- They offer potentially higher returns compared to other tax-saving options but also carry higher risk.
- ELSS comes with a lock-in period of 3 years.
Best ELSS Returns History
Source: Moneycontrol
Public Provident Fund (PPF)
- PPF is a government-backed savings scheme that offers guaranteed returns and tax benefits.
- It has a lock-in period of 15 years, with partial withdrawals allowed after the 5th year.
- PPF is a good option for individuals seeking long-term investment and capital protection.
- It provides less return compared to other Tax Saving Investments Options.
PPF Return History
National Pension System (NPS)
- NPS is a voluntary pension scheme that allows individuals to invest in a diversified portfolio of assets.
- It offers tax benefits and the option to choose your investment strategy.
- NPS has a lock-in period until retirement, except for specific circumstances.
- If you are looking for a retirement solution along with tax savings every year, NPS is one of the good Tax Saving Investments Options.
NPS Returns History
Source: NPStrust.org
Unit Linked Insurance Plans (ULIPs)
- ULIPs are insurance policies that combine investment and insurance benefits.
- Premiums paid towards your ULIP can be claimed as a deduction under Section 80C of the Income Tax Act, 1961.
- ULIPs come with various charges and lock-in periods, so it’s crucial to carefully understand the terms before investing.
- If you hold your ULIP policy for at least 5 years and the annual premium is less than 10% of the sum assured, the maturity amount you receive is generally exempt from tax under Section 10(10D) of the Income Tax Act.
ULIP Returns History
Tax Saving Fixed Deposits (FDs)
- Tax-saving FDs are fixed deposits offered by banks for a tenure of at least 5 years.
- They offer guaranteed returns and tax benefits on the interest earned.
- Tax-saving FDs are a good option for individuals seeking low-risk investments and guaranteed returns.
- Choose FDs as Tax Saving Investments as a safe investment option.
National Saving Certificates (NSC)
- The NSC offers guaranteed interest and complete capital protection, just like some other fixed income instruments – Public Provident Fund and Post Office FDs.
- NSC offers a unique feature where the interest earned in the first four years is re-invested and added to the initial investment. This re-invested interest is also eligible for a tax deduction under Section 80C.
- However, the interest earned in the 5th year is not re-invested hence taxable as per the investor’s applicable slab rate.
NSC Returns History
Sukanya Samriddhi Yojana (SSY)
- SSY is an “EEE” tax benefit scheme. It means all three stages of the investment are exempt from tax, i.e., Investment, Interest, and maturity/withdrawal.
- SSY accounts can only be opened for girl children below 10 years of age and With a maturity period of 21 years or until your daughter’s marriage after 18 years (whichever is earlier).
- There is a minimum deposit of ₹250 and a maximum annual investment limit of ₹1.5 lakh.
- The current interest rate for SSY is 8.2% per annum (as of Q3 FY 2023-24), which is one of the highest among small savings schemes.
SSY Returns History
Comparison of Various Tax saving Investment Options and Their Returns
Here’s a comparison of some popular tax-saving schemes in India along with their returns and key features:
| Scheme | Return | Tax benefit | Lock-in period | Investment type | Liquidity |
| Equity Linked Savings Scheme (ELSS) | Potentially high (market-linked)Average return of 14-15% | Up to ₹1.5 lakh under Section 80C | 3 years | Equity | Low (3 years lock-in) |
| Public Provident Fund (PPF) | Fixed (currently 7.1%) | Up to ₹1.5 lakh under Section 80C | 15 years (extendable in blocks of 5 years) | Debt | Very low (15 years lock-in) |
| National Pension System (NPS) | Market-linked (through investment choices, tier 1, or 2)Average return of 9% – 12% | Up to ₹1.5 lakh under Section 80C (additional ₹50,000 under Section 80CCD(1B) for self-employed) | Up to 60 years (partial withdrawal allowed after 10 years) | Equity & Debt | Low (up to 60 years lock-in, partial withdrawal allowed with restrictions) |
| Unit Linked Insurance Plan (ULIP) | Market-linked (combination of insurance and investment) | Up to ₹1.5 lakh under Section 80C | Varies depending on the plan | Mixed (insurance & equity/debt) | Low (lock-in period varies, surrender charges apply) |
| National Savings Certificate (NSC) | Fixed (interest rate reset quarterly, currently 7.7%) | Up to ₹1.5 lakh under Section 80C | 5 years | Debt | Moderate (premature withdrawal allowed with penalty) |
| Sukanya Samriddhi Yojana (SSY) | Fixed (currently 8.2%) | Up to ₹1.5 lakh under Section 80C | Maturity period of 21 years (funds locked until girl child turns 18) | Debt | Very low |
| Tax Saving Fixed Deposit (FD) | Fixed (interest rate varies with bank and tenure)Average 6.5% – 8% | Up to ₹1.5 lakh under Section 80C | Tenure chosen at investment (typically 1-5 years) | Debt | Moderate (premature withdrawal allowed with penalty) |
