Best Tax Saving Investment Option

1. ELSS

Tax Saving under ELSS Mutual Funds has been specifically designed to attract those investors who are looking to save taxes, together with earning maximum possible returns on their money. In recent years, due to the inflationary market, ELSS has also become the Tax Saving Investment option that is most requested. This has been possible due to the High Returns that they earn, despite being High Risk.

Other than the above criterion, why it still tops the options given in the above list is because:

Equity-Based Option (other than ULIP),

Lowest Lock-in Period,

SIP option available.

With SIP, the best mode of payment, you need to deposit a fixed amount of sum at regular intervals of time in your selected Mutual Funds. Summarily, a Lump Sum investment mode can be chosen if you have money in hand right now to invest and you can opt for SIP if you are expecting a regular inflow of money in the future. Investing via SIP makes the overall investment easy and affordable. Besides, it multiplies the money better than other forms of investment through the effect of averaging and the power of compounding.

2. PPF

This Long-Term Saving Scheme was issued by the Central Government. The upper limit of investment in these schemes is Rs. 70,000, u/s 80C. Additionally, the Annual Returns and the maturity Amount is 100% Tax-Free. Further, the Returns are guaranteed, making PPF the best Tax Saving Investment of all time. But, since tax saving is not the sole purpose of why we invest, we need to go beyond this scheme. Besides, with its 15-year Lock-in duration, it stops to attract.

3. NPS

With NPS (National Pension Scheme), the percentage of your basic salary (up to a maximum of 10%), that your employer contributes towards it, is Tax Deductible. But, only Rs. 1,00,000 has been set as Tax-exempt, for contributing towards NPS.

Senior Citizen Saving Scheme

For investing in this effective and long-term saving option, you need to be a senior citizen, in India. That is, you must be above 60 years of age. Those retirees, who opted for the Voluntary Retirement Scheme (VRS) or Superannuation in the age bracket 55-60, are also included. Or you can be a retired Military person with a minimum age of 50 years, to be able to take advantage of this scheme. The benefits are the same as those Tax Saving investment that is usually associated with any government-sponsored savings or investment scheme.

4. EPF

Under Employees Provident Fund or EPF Scheme, an employee has to pay a certain contribution towards the scheme and this contribution is to be matched by the employer. The employee gets a Lump Sum amount, at the time of retirement. Some eligibility criteria apply to this option. The number of employees working under that employer (minimum 20) and the basic wages of the employee (maximum Rs. 15,000 per month) who want to invest.

5. BANK FD

Though Bank Fixed deposits are deemed as the safest savings option that helps you increase your finances without getting influenced by the market highs and lows. But the returns from these schemes are Limited & Taxed.

6. NSC

NSC, short for National Saving Certificate, is a type of Tax Saving Investment offered by India Post. Just like the PPF and Bank FDs, this scheme too is a secure and low-risk fixed-income instrument. The benefits, as well as the drawbacks, are similar. But unlike PPF, the Returns in NSC at maturity are taxable.

7. LIFE INSURANCE - LIC

Life Insurance cannot be called a purely tax saving investment. And, thanks to the life cover, it is essential to buy one. At least for the earning member of the family, to have a sort of financial cushion in case of a contingency. The Premium paid is deductible u/s 80C, thereby lowering your taxable income.

Moreover, now Life Insurance has been offering a whole new variety of options for investment. These are, generally, divided under these headings:

Term Plans,

Endowment Plans,

Money-Back Plans, and,

ULIPs, Unit Linked Plans.