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Here Are 6 Tax Saving Investment Options in India

  7/18/23 8:47 AM

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John had very few tax saving investments. This year, he didn’t want to lose his earnings by paying heavy taxes. In order to get all his financial queries resolved he spoke to Mohit, his financial advisor.

Mohit advised John, “Investment plans that can help you save tax are important in the modern day. If you wish to start investing for the purpose of saving on taxes then here are the 6 best tax saving instruments.

  • Unit Linked Insurance Plans

Unit Linked Insurance Plans in India are among the most common products in which investors put their money as they not only provide insurance cover but are also a sound form of investment. In ULIP the money is invested in the market and the policyholder has a liberty to choose how much of his wealth must be invested in equity shares and debt funds. These policies are tax efficient and offer benefits under Section 80C of the Income Tax Act. The maturity amount is also tax-free. There are new age unit-linked insurance plans like Edelweiss Tokio Life – Wealth Plus which encourages an investor to save money on a regular basis in a systematic manner for a longer duration by providing additional allocations.

  • Tax Saving Fixed Deposits

These fixed deposits are similar to regular fixed deposits. Even the interest rate applicable to Tax Saving Fixed Deposits is the same as other fixed deposits. However, investors will not be able to withdraw their funds for a minimum of five years or before the maturity of the scheme. The interest earned on Tax Saving Fixed Deposits is tax-free, ensuring that customers enjoy peace of mind and maximum benefits.

  • Public Provident Fund

Individuals who invest in Public Provident Funds can draw maximum tax savings with full safety as there is plenty of ease and flexibility in PPF accounts. Almost all major banks provide the facility to its customers. PPF accounts can be opened for tenures of up to 15 years. Customers will not be allowed to redeem their investment prior to the maturity of the scheme. PPF is among the safest investment choices as the funds invested remain with the country’s government and the security against which it is benchmarked is the 10-Year Government Bond. This makes it a safer investment option for people with no risk appetite.

  • Employee Provident Fund

Employers have a compulsion to subtract 12% of their employees’ salaries in lieu of EPF (Employee Provident Fund). The employer also makes the same contribution and the investment is eligible for tax deduction. Transferring an EPF from one job to another is as easy as it gets. All you have to do is withdraw the EPF after you leave a job. The money invested in it will be locked until the investor retires. The entire amount invested can also be withdrawn by the employee if he/she is unemployed for more than two months. However, tax will be applicable to any funds withdrawn prior to completion of five years of the scheme. Like PPF, EPF is also among the safest investment choices as the funds remain with the Indian government, thus making it safer for reluctant investors.

  • National Pension Scheme

Despite the fact that National Pension Scheme (NPS) is not considered as a popular tax-saving instrument, it has the potential to ensure a secure retired life in addition to implementing tax savings. Investments in National Pension Scheme can be claimed as deductions under Section 80C of the Indian Income Tax Act. However, investors can only access the funds once they have retired from their professional life.

  • Term Insurance

A term insurance policy provides a life cover which ensures that the policyholder’s family will be secured in case of the unfortunate event of the policyholder’s demise. Term insurance policies are significantly cheaper than most other insurance packages, making them a fairly decent investment option for tax saving purposes.

In addition to the aforementioned products, you can find several other tax saving investment instruments too. Products such as tax-free infrastructure bonds, pension plans, and endowment policies can also help you save plenty of money that would otherwise be spent on taxes.

After listening to Mohit’s advice, John was determined that this year he would save more for his future financial goals rather than paying heavy taxes.


Chirag Iyer - BFSI Enthusiast

Chirag is a writer and an avid reader who loves to drink coffee! His other interests include boxing, karate, and singing.

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