Best Tax Saving Schemes In India

 



1. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is one of the most popular tax-saving investment options in India. It is a long-term savings scheme and offers attractive interest rates. Individuals can open a PPF account with designated banks or post offices and contribute a minimum of Rs. 500 per year. The maximum annual investment limit is Rs. 1.5 lakh and the deposited amount is eligible for tax deduction under Section 80C of the Income Tax Act. The interest earned and the maturity amount are tax-free. The PPF scheme has a lock-in period of 15 years, and partial withdrawals are allowed after the completion of 7 years.

2. National Savings Certificate (NSC)

The National Savings Certificate (NSC) is a government-backed small savings scheme that provides tax benefits. It is available in various denominations and purchased from post offices across the country. The NSC has a fixed maturity period of 5 years and offers an attractive interest rate. The investment made in NSC qualifies for a tax deduction under Section 80C of the Income Tax Act. However, the interest earned on NSC is taxable. The NSC is a safe investment option and is ideal for individuals looking for fixed returns over a specific period.

3. Employee Provident Fund (EPF)

The Employee Provident Fund (EPF) is a mandatory retirement savings scheme for salaried employees in India. It is governed by the Employees’ Provident Fund Organization (EPFO) and offers tax benefits to employees. Both the employee and employer contribute a certain percentage of the employee’s salary to the EPF account. The employee’s contribution qualifies for tax deduction under Section 80C, and the interest earned on EPF is tax-free. The EPF scheme helps employees build a retirement corpus and provides financial security post-retirement.

4. Life Insurance Premiums

Life insurance policies not only provide financial protection but also offer tax benefits. The premiums paid for life insurance policies are eligible for tax deduction under Section 80C of the Income Tax Act. The maximum deduction allowed is Rs. 1.5 lakh. Additionally, the maturity proceeds and death benefits received from life insurance policies are tax-exempt under Section 10(10D) of the Income Tax Act.

5. Equity-Linked Savings Scheme (ELSS)

The Equity-Linked Savings Scheme (ELSS) is a tax-saving mutual fund scheme that invests primarily in equity markets. It offers the dual advantage of potential wealth creation and tax benefits. The investments made in ELSS are eligible for tax deduction under Section 80C of the Income Tax Act, up to a maximum limit of Rs. 1.5 lakh. ELSS has a lock-in period of 3 years, which is the shortest among all tax-saving investments. It allows investors to benefit from the potential growth of the stock market while enjoying tax savings.

6. Sukanya Samriddhi Yojana (SSY)

The Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme aimed at promoting the welfare of the girl child. Parents or guardians can open an SSY account for a girl child below the age of 10 years. The contributions made in the SSY account are eligible for tax deduction under Section 80C of the Income Tax Act. The scheme offers an attractive interest rate and has a maturity period of 21 years from the date of account opening. The funds accumulated in the SSY account can be utilized for the girl child’s education and marriage expenses.

7. National Pension Scheme (NPS)

The National Pension Scheme (NPS) is a voluntary pension scheme that provides tax benefits and retirement planning options. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Under NPS, individuals can invest in equity, debt, and government securities. The contributions made in NPS are eligible for tax deduction under Section 80C and Section 80CCD(1B) of the Income Tax Act. NPS also offers an additional tax deduction of Rs. 50,000 under Section 80CCD(1B). The maturity amount is tax-free up to 60% of the corpus, and the remaining 40% is mandatorily used for purchasing an annuity.

8. Senior Citizen Savings Scheme (SCSS)

The Senior Citizen Savings Scheme (SCSS) is a government-backed savings scheme specifically designed for senior citizens above 60 years of age. It offers regular income and tax benefits to senior citizens. The SCSS has a maturity period of 5 years, which can be extended by an additional 3 years. The investment made in SCSS qualifies for a tax deduction under Section 80C of the Income Tax Act, subject to a maximum limit of Rs. 1.5 lakh. The interest earned from SCSS is taxable, but the scheme provides a higher interest rate compared to other fixed-income instruments.

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