Tax-saving investment instruments: Here’s all you need to know

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Reducing the tax burden is a prime target for many common men. There are various investment schemes available that not only help you avail tax exemptions benefits but also help you achieve your long-term investment goals. Here are some popular tax savings investment options.

Tax-saving fixed deposit

Fixed deposits (FD) constitute one of the safest investment options which offer a fixed return. It is still one of the popular investment avenues for many middle-class Indians. Tax-saving FDs come with a lock-in period of 5 years and more. For taxpayers, tax-saving fixed deposits is one of the best schemes which is safe and offers good returns with tax savings. The interest rates vary from bank to bank.

Public Provident Fund

Public Provident Fund (PPF) is one of the popular and best options to save tax under section 80C of the Income Tax Act. It is backed by the government and is one of the safest avenues for long-term investment. PPF also offers relatively higher interest rate (7.1%) and the returns are fully exempt from tax.

Voluntary Provident Fund

Voluntary Provident Fund is another instrument to save the tax burden. This is an option for additional contribution to one’s provident fund account. The returns on maturity are tax-free.

Sukanya Samriddhi Yojana

If you have a daughter Sukanya Samriddhi Yojana (SSY) is one of the best secure investment options for you. This scheme offers an attractive rate of interest and is fully exempt from tax under section 80C. The tenure of SSY is 21 years or until the daughter is married after 18 years of age.

National Pension Scheme

National Pension Scheme (NPS) is the government’s retirement cum investment scheme. Through this scheme, an individual can build a big corpus for himself/herself. Employees working in the government except armed forces staff, private, public, and unorganised sectors can subscribe to this scheme. Investing in NPS can get you extra tax deduction up to Rs 50,000.

Atal Pension Yojana

Atal Pension Yojana (APY) is a government sponsored social security scheme, which was launched in 2015. All bank account holders can join the scheme, which offers a minimum pension of Rs 1,000 and a maximum of up to Rs 5,000 a month. It offers a guaranteed pension after the age of 60.

Senior Citizen Saving Scheme

This is a government-backed retirement benefit program for senior citizens. Now SCSS is offering 7.4% annual interest rate payable quarterly. It is available across all banks and postal offices across India. One can get an income tax deduction of up to Rs 1.5 lakh under section 80C of the Income Tax Act.

Life Insurance

Life insurance has several benefits. Your life insurance premium is deductible from your total income under section 80C. Also, the pay-out to a beneficiary in case of death is not taxable.

Health Insurance

You can get tax deduction on your health insurance premium under section 80D of the Income Tax Act. It covers the policyholder, spouse, children and dependent parents of the policyholder.

National Savings Certificate

The investment made in the National Savings Certificate is eligible for deduction under section 80C. The scheme has a tenure of five years.