Financial Goal Guide

Attain Your Financial Goal

The Best Investment For Tax Saving

Taxes are one of the biggest expenses and can significantly diminish your investments, so making smart tax-saving choices is crucial to protecting them.

Investments such as permanent life insurance policies can be very tax-efficient, since proceeds are paid out free from income taxes. 529 accounts also allow you to save for education costs tax-deferred growth.

Equity Linked Savings Scheme (ELSS)

As a tax-saving investment option, ELSSs offer superior potential returns. They are market-linked instruments which offer returns based on the performance of their underlying portfolio; making them more appealing than other investments such as FDs, PPFs and NSCs and providing greater returns than life insurance policies; plus they feature a lower lock-in period of three years – ideal for those with long-term plans but tax savings goals in mind.

However, ELSS funds are high-risk investments as they invest primarily in equity-linked securities. Therefore, they are best suited for investors who understand the inherent risks involved with market-linked assets and who understand their own investing discipline and commitment to disciplined investing habits – thus taking advantage of compound returns to reap long-term returns. Investing via lump sum or Systematic Investment Plans (SIPs) allows investors to choose between investing large or small amounts regularly with discipline allowing compound returns over time to compound.

Public Provident Fund (PPF)

PPF (Public Provident Fund) is a long-term investment scheme offered by the Indian government, offering fixed interest and tax-free maturity. Furthermore, investors may claim a deduction up to Rs 1.5 lakh on investments made into PPF accounts.

Investors can easily open a PPF account online through their bank accounts with participating financial institutions. Investors can select either “Self Account” or “Minor Account”, depending on whether it’s for themselves or minor children, then deposit money regularly either manually or through standing instructions.

An Individual Provident Fund (PPF) account can be opened by any Indian citizen who resides in India. Once open, account holders can select a beneficiary for their PPF and make partial and premature withdrawals under certain conditions. PPF accounts can be extended up to 15 years – investors may decide whether to extend it with or without contributing further funds.

National Savings Certificate (NSC)

NSC (National Savings Certificates) are tax-saving investments with fixed returns available through post offices, offering tax advantages comparable to PPF, ELSS Mutual Funds and National Pension Scheme (NPS).

Section 80C of the Income Tax Act allows National Savings Certificate investors to claim a maximum deduction of Rs 1.5 lakh annually from their taxable income. NSC interest compounded annually and paid on maturity without TDS deduction allows an investor to nominate any family member (even minors) as beneficiaries should they pass away before collecting his corpus.

Individuals looking to invest in National Savings Certificates can visit their nearest post office and provide the necessary documentation, including proof of identity, address and PAN card. Once their paperwork has been processed they can deposit either cash or demand draft investments and use the NSC calculator to calculate returns based on investment amount, interest rate and tenure.

National Pension Scheme (NPS)

The National Pension Scheme (NPS) can offer tax savings of up to Rs 1.5 lakh to both salaried and self-employed individuals, in addition to employer contributions which are also tax free.

The NPS scheme is overseen by professional pension fund managers with in-depth market knowledge who offer higher returns than most alternative investment vehicles, while having lower management charges than many alternatives.

NPS accounts are portable – you can take your NPS account with you if you change jobs or relocate, making this plan especially appealing for young people looking for various opportunities throughout their lifetimes. Furthermore, PFRDA regulations make NPS accounts easy to track and monitor performance as they offer low costs while compounding can help build up retirement corpuses over 35-40 years of investing.