Top 7 tax saving investments: Returns, ranking, pros & cons

Tax Saving Investments

Top 7 tax saving investments

7 tax saving investments: While taxpayers race to finish their tax preparation for the fiscal year ending March 31, 2022, we have attempted to make things easier for them by providing information on the top tax savers. The following ten tax-saving (Top 7 tax saving investments) instruments have been graded on eight essential parameters: returns, safety, flexibility, liquidity, costs, transparency, ease of investing, and income taxability, with equal weightage given to each.

Traditional life insurance plans score last, whereas ELSS funds (Top 7 tax saving investments) are the obvious victor at number one. Here are the top ten tax-saving options to help you decide which is best for you.

​1.ELSS mutual funds

7 tax saving investments

ELSS funds perform admirably across the board. They offer the potential for big returns, are transparent about where they invest, and have extremely low expenses. Furthermore, investors benefit from a relatively short lock-in period and the ability to stop at any time. However, due to stock market volatility, ELSS funds can be hazardous, which suits long-term investors who use the SIP approach. However, the SIP window has closed for those who must demonstrate documentation of Sec 80C tax-saving (Top 7 tax saving investments)investments within the next several days. So, instead of investing a significant sum in ELSS funds all at once, we recommend spreading the investment out into 2-3 tranches before the March 31 deadline.

ELSS, which stands for Equity Linked Savings Scheme, is a category of mutual funds that primarily invest in equities or stocks. ELSS funds offer a dual benefit – they help you save taxes under Section 80C of the Income Tax Act, and they have the potential to generate substantial returns over the long term.

Understanding Tax Saving Investments

Investments that qualify for tax deductions under Section 80C are essential for taxpayers. ELSS is one such avenue that allows individuals to claim a tax deduction of up to Rs. 1.5 lakh in a financial year. This makes it an attractive option for both novice and experienced investors.


7 tax saving investments

The first 60% of the corpus removed at retirement is tax-free. Younger investors can now devote up to 75% of their portfolio to stocks. Older participants can continue to participate in the programme after retiring until the age of 70 and delay their withdrawals. However, investors should not anticipate NPS to provide particularly high returns in the short to medium term. Bond yields are beginning to increase and might skyrocket if interest rates are raised. In this case, NPS investments may not provide extremely appealing returns.

However, its tax advantages are unparalleled. NPS can help you save tax in three ways: contributions of up to Rs 1.5 lakh can be claimed as a deduction under Sec 80C; contributions of up to Rs 1.5 lakh can be claimed as a deduction under Sec 80D; and contributions of There is an extra deduction of up to Rs 50,000 under Sec 80CCD(1b); if the employer contributes up to 10% of the individual’s basic salary to NPS, that sum is not taxable.



Ulips are a powerful rebalancing tool that may meet a variety of financial demands at the same time. They outperform ELSS funds and are more adaptable since investors may convert from equities to debt (or vice versa) based on their market reading. Furthermore, because Ulips income is tax free, there are no tax ramifications on the gains gained from such moving. A Ulip, on the other hand, may not be able to provide you with the necessary life insurance. Furthermore, it is a long-term investment, and you must stick with it for the entire time or risk losing liquidity. Be wary of asset advisers that try to missell Ulips to you, especially around the tax-saving deadline.

4. Senior Citizens’ Saving Scheme

SCSS is the best investment option for those above 60, especially after the additional tax exemption for interest up to Rs 50,000. The scheme beats PPF in terms of interest. Even 5-year tax-saving FDs, which fetch higher returns than regular FDs can’t rival SCSS. However, the eligibility is restricted to senior citizens. Further, the overall investment limit is Rs 15 lakh per individual. In some cases, where the investor has opted for voluntary retirement and has not taken up another job, the minimum age is relaxed to 58 years. There is also no age bar for defence personnel.

​5. PPF


PPF yields a modest interest rate of 7.1% despite its good ratings for safety, flexibility, and taxability. While bond yields are expected to climb, this may not translate into higher rates for modest savings plans. According to experts, the interest given on modest savings programmes is unnecessarily high and should differ by at least 30-50 basis points. The PPF is superior than fixed deposits since it is tax-free. The programme has a 15-year term from the first investment, which can be extended in five-year increments at maturity.

What is PPF?

PPF, short for Public Provident Fund, is a savings-cum-investment scheme offered by the Government of India. It was introduced with the objective of encouraging small and medium-income earners to save for their future and retirement. PPF accounts can be opened in authorized banks and post offices.

History of PPF

The PPF scheme was launched in 1968 by the Ministry of Finance, Government of India. Over the years, it has gained immense popularity due to its safety, attractive interest rates, and tax benefits. It has become an integral part of financial planning for many individuals.

PPF Eligibility Criteria

To open a PPF account, an individual must be a resident of India. HUFs (Hindu Undivided Families) and NRIs (Non-Resident Indians) are not eligible for PPF accounts. An individual can open only one PPF account in their name.

​6.National Savings Certificate

National saving

NSCs now offer rates that are only marginally higher than those offered by banks on their tax-saving FDs. But the big benefit is that NSCs are government backed. The returns are also assured and there’s a short 5-year lock-in, unlike in the PPF. Also, you don’t need to make a multi-year commitment as in case of insurance plans. Interest earned on the NSC is also eligible for deduction under Section 80C in subsequent years.

​7. Tax-saving fixed deposits


Interest rates on tax-saving FDs are low, but interest taxes reduce them even further. Due to the fact that interest is completely taxed, the after-tax rate for investors in the 30% tax band is less than 5%. Endowment insurance policies provide something similar. Tax-saving FDs are ideal for people who have put off tax preparation and are looking for last-minute investment opportunities. Even if his bank has closed for the day or the investor needs to leave town, he may readily start this FD using Net banking.

In today’s financial landscape, individuals often seek ways to minimize their tax liabilities while securing their financial future. Tax-saving fixed deposits have emerged as a popular investment avenue in this regard. This article will delve into the various aspects of tax-saving fixed deposits, offering a comprehensive guide on why they are a wise choice for investors.

Understanding Tax-saving Fixed Deposits

Tax-saving fixed deposits, also known as Tax-saving Term Deposits, are financial instruments that not only help you grow your wealth but also provide tax benefits under Section 80C of the Income Tax Act, 1961. These deposits are offered by banks and financial institutions for a lock-in period of 5 years.

Key Features and Benefits

  1. High Safety and Security: Tax-saving fixed deposits are among the safest investment options, backed by the credibility of established financial institutions.
  2. Tax Benefits: Investments in these fixed deposits are eligible for a deduction of up to Rs. 1.5 lakh from your taxable income, significantly reducing your tax burden.
  3. Stable Returns: These deposits offer fixed and guaranteed returns, shielding you from market fluctuations.
  4. Flexible Tenure: While the lock-in period is 5 years, investors can choose the tenure for regular fixed deposits as per their preferences.
  5. Loan Facility: Most banks allow you to avail of loans against your tax-saving fixed deposits, ensuring liquidity in times of need.

Eligibility and Documentation

To invest in tax-saving fixed deposits, you need to be an Indian resident or part of Hindu Undivided Families (HUFs). The documentation required includes identity proof, address proof, and recent passport-size photographs.

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