Best Tax Saving Investments for you

1- Public Provident Fund

Public Provident Fund is my topmost tax saving option. It gives you full tax saving with maximum safety. There is a lot of flexibility and ease also. Anyone can invest in this. Almost every big bank offers this facility.

Tax Saving
  • You can save tax on this investment as it comes under 80C.
  •  Interest paid is also tax free.
  • Redemption amount is also not taxed such as insurance maturity amount.
Lock In Period PPF investment is for 15 years. Normally you can’t redeem it before that.
You can take loan before 5 years and withdraw it partially after 5 years
Investment Limit You have to invest minimum 500 annually.
Maximum investment limit is 1,50,000 annually
Safety This is one of the safest investment option. Banks process it and money remains with the government of India
Interest Interest rate varies with the market rate. 10 Year government Bond yield is the benchmark. hence it will never under perform .
Where to Invest State bank of India and all big National and private Banks give this facility.
Now you can open PPF account online also. Even Post office also gives this facility.
Recurring Investment It is not mandatory to invest fixed amount every year unlike insurance schemes. You can invest any amount. You can invest once a year or up to 12 times a year.

Employees get the benefit of EPF which gives them retirement saving with tax benefit. For professional and self-employed PPF plays this role. Return and conditions of PPF withdrawal is same as EPF. But in PPF you get much more flexibility. You can invest in PPF up to the limit of 80C investments.

Note – PPF starts calculating 15 years from next April. It means that if you start investing since Dec 2013, your PPF account will mature in April 2029. But if you invest during 1 – 5 April your account would be considered from same financial year. Also put your money before 5 of every month to get the interest of that month.

Useful:  Top 10 Income Tax Calculators of FY 2016-17

2- Employee Provident Fund

Organised sector employee must be aware of this tax saving investment. It is mandatory for employers to deduct 12% of the employee salary towards employee provident fund (EPF). Employer also contribute the same amount. This investment is qualified for tax deduction. Fewer people know that you can invest more than the prescribed 12%. This excess amount also get tax benefit. The EPF can be transferred from one job to another easily. After leaving the job you can withdraw EPF.

Tax Saving
  • Money being invested in EPF get tax deduction under 80C.
  • Interest paid is also tax free.
  • Redemption amount is also not taxed .
Lock In Period Money is locked till your retirement.
If you remain unemployed for 2 months then you can withdraw your whole amount.
Withdrawing money before 5 year would be taxable
You can withdraw partially in special situations.
Investment Limit You get tax benefit till 80C limit. You can invest more than the prescribed 12% of the salary. Excess amount will also get tax benefit.
Safety This is one of the safest investment option. Money remains with the government of India
Interest EPFO determines Interest rate every year according to its return. EPFOinvest mainly in government bonds.
How to Invest Your employer deducts it regularly. For excess deduction you can say to your employer in the beginning of the financial year.
Recurring Investment There is no flexibility. EPF portion always remains 12% of your salary. Also Once you decides for excess deduction it will remain there till the end of financial year.

best tax saving elss nsc ppf epf

3- Equity Linked Saving Scheme (ELSS)

Equity Linked Saving Scheme (ELSS) has a minimum lock-in period. Your money is locked only for three years. But you should not always exit from it after three years. Equity investments give good return in a longer period. You can even rotate your investment after three years. Becasue of  this, you will be spared of fresh investment for tax saving after the three years. Also, If you need some money before three years then choose the dividend option. It will give tax-free dividend as well. SIP would be the perfect way to invest in these funds. It averages the ups and downs of the market. You can invest more than the 80C limit in the ELSS.

Tax Saving
  • Money invested in ELSS get tax deduction under 80C.
  • Dividend paid is also tax-free.
  • Maturity amount is also not taxed.
Lock-In Period This option has smallest lock-in period. After 3 year you can redeem your money.
Investment Limit You can invest any amount, but tax benefit is limited to 80C rules. (Upper limit for 80C tax rebate is 1 lakh total)
Safety It is as risky as any diversified equity mutual fund. As all of your money is invested in share market yo can experience the roller coaster ride.
Return Traditionally, long term Equities give a better return than any other investment. But it may happen that after the completion of 3 year lock in period your money get depleted.
How to Invest Many fund houses have the ELSS. You can Invest online directly through the Fund house’s own website or through the distributors such as FundsIndia.
Recurring Investment There is no limitation for recurring investment. But fixed SIP would be suitable to overcome the market’s up and down.

Must Read: Best ELSS To Invest in 2018

Also Read  : Top 5 Benfeits of SIP

4- National Pension System (NPS)

  • National Pension System (NPS) is not much popular tax saving investment. But it gives you a happy retirement life as well as tax saving. You can claim investment in the NPS for tax deduction under the 80C. But it has a big drawback also. Government did not make maturity proceedings tax free.
  • You will get money only after the retirement.
  • From the 60% of the maturity amount you have to take annuity policy.
  • Rules are somewhat stiff but it is designed to give you happier retirement life. Government has added some flexibility, which has made it more attractive. You can read in details about it here
  • You can also transfer EPF balance to NPS account.

Pension Bill – Changes in National Pension System and Benefits to You

Tax Saving
  • Money invested in NPS get tax deduction under 80C.
  • Maturity amount is taxable
Lock In Period Money is locked till your retirement. You can withdraw 25% in special circumstances with some conditions .
Investment Limit Tax saving under 80C rule . You can claim tax deduction up to 10% of your salary which should not be more than 80C limit . However can invest more but it will not get tax saving.
Your employer can contribute more on his behalf in your account. This contribution will be tax free over and above the 80C limit.
Safety Money is invested in fixed instrument as well as in shares. You have to choose where you want to invest. Equity investment can not be more than 50% of the fund. Also there is life cycle fund which automatically changes your asset allocation with age.
Now government also gives minimum guarantee of the return. You can take that option also.
Return You can expect market return of fixed investment. If you are investing more in equity then you should be ready for ups and down. But don’t worry for longer period it will certainly give good return.
How to Invest Government Employees now invest their money in this scheme by default. Private company employee and unorganized worker can subscribe this scheme from the ‘point of presence’. These are the distributor of National Pension System. most of them are banks while some are financial companies. Go through this link
Recurring Investment You have to invest minimum 6000 in a year else you will be fined for 100 rupees per year. No contribution can be less than 500 rupees.

Author: Girraj

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