Every individual wants that a large part of his hard-earned money does not go in taxes, and for this, proper tax planning is extremely important. In India, there are many investment options available under Section 80C of the Income Tax Act, by investing in which you can get a tax exemption of up to Rs 1.5 lakh annually. From ELSS to PPF, these investments not only help in saving tax but also give good returns in the long run, thereby strengthening your financial position.
Here is a list of 7 best tax-saving investment options in India, by investing in which you can save tax and lay the foundation for a secure future. But one must remember that these investment plans get deduction benefits only under the Old Tax Regime.
Also read: Best short-term investment options for higher returns
What is the right way to save tax through investment?
There are a few things to keep in mind while choosing investments for tax saving:
Risk tolerance: Options like ELSS and NPS are better for those who can take a little risk for higher returns.
Investment objective: If you want safe investments without risk, PPF and NSC are better options.
Lock-in period: Some schemes have a long withdrawal period, such as PPF (15 years) and NPS (till retirement).
7 Best Tax-Saving Investment Options in India
- Equity Linked Savings Scheme (ELSS)
Returns: Above 15% (in the long term)
Lock-in period: 3 years
ELSS Mutual Funds are a popular saving and investment instrument that serves two purposes – wealth building and tax savings. Under Section 80C, an investment of Rs 1.5 lakh in this instrument is tax-free.
Benefits: Being a market-based investment, it carries risk, but has the potential to give higher returns than traditional fixed income instruments. For those who are willing to take risks, this is a good option.
- Public Provident Fund (PPF)
Returns: 7.1% per annum
Lock-in period: 15 years
Benefits: Backed by the government, PPF is a completely safe investment and its interest and maturity amount are tax-free, making it an ideal option for conservative investors. PPF investment enjoys a deduction benefit of Rs 1.5 lakh under the Old Tax Regime.
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