How to save tax in India with these 5 Tax saving investments
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How to save tax in India with these 5 Tax saving investments in 2022

    We all work very hard to grow our wealth. Sometimes, however, it seems to us that we end up losing a lot of it to taxes. However, by knowing the best tax-saving investment options, you can successfully grow your wealth in 2020.
    There are various investment options for saving tax. One of the most common ways to save tax is by making use of Section 80C of the Income Tax Act, wherein the government has allowed a tax deduction of up to Rs. 1.5 lakh per annum specifically for investments… Because even though the government wants you to pay taxes, it also encourages investments and money-saving to ensure a healthy economy.
    Here are the 5-top tax-saving investment plans for you. Safe and convenient, these investment plans will not only help you save tax, but also help you build wealth for a brighter future.

    1. Mutual Funds – Equity Linked Saving Scheme (ELSS)

    ELSS or Equity Linked Savings Scheme, is a category of tax-saving mutual funds that invest most of their portfolio in equity, thus allowing the investor to not only save tax but also earn better returns. As far as tax saving investments are concerned, ELSS is by far the best option available for investors.

    Advantages of ELSS

    High long-term returns:

    Its primary goal is to invest your money in a diversified portfolio and earn good returns over the long term. And since most of the ELSS is allocated into equity, the rewards gained are much greater than other tax saving investments.

    Shortest lock-in period:

    While other tax saving options like Public Provident Fund have a lock in period of 15 years, Bank FD is for 5 Years, Equity Linked Savings Scheme has the shortest lock in period of ONLY 3 years. This greatly increases the liquidity aspect of ELSS mutual funds.

    Features of ELSS

    • Lock-in period of ONLY 3 years – meaning ELSS has better liquidity
    • 80-100% of the funds are allocated into equity, which means ELSS returns are much higher in the long run.
    • Minimum investment lumpsum INR 5,000/- and through SIP INR 500/- per month
    • Income tax benefit up to Rs 46,800/- per annum according to Section 80C on an Investment of Rs 1.5 Lakhs.

    2. Public Provident Fund (PPF)

    A government-guaranteed investment option – Public Provident Fund or PPF provides fixed returns along with tax benefits under section 80C. Individuals can open a PPF account at banks or at post offices. It has a lock-in period of 15 years; however, one can extend the duration of the account by a block of 5 years.


    • You can start your PPF account with a minimum contribution of Rs. 500 per year and a maximum of Rs. 1.5 lakh in a financial year.
    • An individual can open only one account under his/her name. 
    • PPF payments can be made in the form of demand draft, cheque, cash or via online transfer.
    • PPF loans can be availed against the account, amidst the 3rd and 5th financial year (from the date of opening the PPF account).

    3. Tax Saver FD Schemes

    Tax saver fixed deposit (FD) is a type of deposit, in which you can get tax deduction benefit under section 80C of the Indian Income Tax Act. The minimum booking period for tax-saving fixed deposits is 5 years. Moreover, you can get a tax exemption of a maximum of Rs. 1.5 lakh, by investing in them. 


    • Invest as small as Rs. 10,000
    • Flexible interest payout – monthly, quarterly or reinvestment in principal.
    • Avail loan on the FD amount for a lesser interest
    • Premature withdrawal is not allowed.

    4. Unit Linked Insurance Plans (ULIPS)

    When you make an investment in ULIP, the insurance company invests part of the premium in shares/bonds, etc., and the balance amount is utilized in providing an insurance cover. Hence, ULIP is both an insurance policy and an investment. It provides life insurance cover, investment opportunities, and tax-saving benefits under section 80C of Income-tax act.
    The minimum locking period is 5 years. With regular premium payments, you can enjoy the benefits of wealth creation for your loved ones.


    • You are required to pay the entire premium amount as a lump sum at the beginning of the policy term.
    • You can switch your portfolio between debt and equity-based on your risk appetite and market performance.
    • It offers stable performance or low risks or both.

    5. Senior Citizen Saving Schemes (SCSS)

    Introduced by the Government of India, the main objective of the Senior Citizen Saving Schemes (SCSS) is to provide an assured return (paid every quarter) to senior citizens. This scheme is best known for its guaranteed regular flow of income, safety of investment and tax benefits.  The SCSS is available at post offices and certified banks across the country. The lock-in period for this scheme is five years; however, it can be extended by three more years.


    • Retirees in the age group of 55-60 years who have opted for Voluntary Retirement Scheme (VRS) or Superannuation are eligible to avail this scheme.
    • This scheme can be availed with a minimum deposit amount of Rs. 1000.
    • Investments made under SCSS are eligible for tax deduction under section 80C of the Income Tax Act
    • Portability of the account from one bank to another is available.
    • Premature withdrawal is allowed.
    If you haven't made any tax-saving investments yet and are looking for a safe and easy bet for saving tax in year 2020, you would do well to choose from the mentioned investment plans.
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