Top 10 Best Tax Saving Schemes in India

Tax planning is an essential part of financial management. With the right tax-saving schemes, you can not only reduce your taxable income but also grow your wealth in the long run. The Indian government offers several tax-saving instruments under the Income Tax Act, 1961, primarily under Section 80C and other provisions. If you are looking for the best tax saving schemes, this guide will help you choose the most suitable one.

1. Employee Provident Fund (EPF)

EPF is one of the most popular and best tax saving schemes in India. It is a government-backed retirement savings plan available for salaried employees. Contributions made to EPF qualify for deductions under Section 80C of the Income Tax Act.

Features:

• The employer and employee contribute 12% of the employee’s basic salary.
• The interest earned is tax-free.
• Lock-in period until retirement (with partial withdrawal options).

2. Public Provident Fund (PPF)

PPF is a long-term investment scheme backed by the government, offering tax benefits and risk-free returns. It is among the best tax saving schemes for individuals who want a secure and stable investment.

Features:

• Tax deduction up to Rs 1.5 lakh under Section 80C.
• Interest earned and maturity amount are tax-free.
• A 15-year lock-in period with partial withdrawals allowed after 6 years.

3. National Pension System (NPS)

NPS is a government-sponsored retirement savings scheme that offers dual benefits of tax-saving and pension income.

Features:

• Tax deduction up to Rs 1.5 lakh under Section 80C.
• Additional deduction of Rs 50,000 under Section 80CCD(1B).
• Partial withdrawal allowed after 10 years.
• Market-linked returns.

4. Equity-Linked Savings Scheme (ELSS)

ELSS is a mutual fund scheme that invests primarily in equities. It is one of the best tax saving schemes for those who want higher returns with tax benefits.

Features:

• Shortest lock-in period of 3 years among tax-saving options.
• Tax deduction up to Rs 1.5 lakh under Section 80C.
• Potential for higher returns as it is market-linked.

5. Sukanya Samriddhi Yojana (SSY)

SSY is a government scheme aimed at securing the future of a girl child. It offers attractive tax benefits and interest rates.

Features:

• Tax deduction up to Rs 1.5 lakh under Section 80C.
• Interest earned and maturity amount are tax-free.
• 21-year lock-in period or until the girl turns 18 and gets married.

6. Fixed Deposit (Tax-Saving FD)

A 5-year tax-saving FD is a safe investment option with tax benefits under Section 80C.

Features:

• Tax deduction up to Rs 1.5 lakh.
• Fixed returns with zero market risk.
• Interest earned is taxable.
• 5-year lock-in period.

7. Unit Linked Insurance Plans (ULIPs)

ULIPs provide both insurance and investment benefits, making them a preferred choice among the best tax saving schemes.

Features:

• Tax deduction up to Rs 1.5 lakh under Section 80C.
• Maturity proceeds are tax-free under Section 10(10D).
• Market-linked returns with flexibility in fund allocation.

8. National Savings Certificate (NSC)

NSC is a secure fixed-income investment option that offers tax-saving benefits.

Features:

• Tax deduction up to Rs 1.5 lakh under Section 80C.
• Fixed interest rate.
• 5-year maturity period.
• Interest earned is taxable but reinvested for tax benefits.

9. Senior Citizen Savings Scheme (SCSS)

SCSS is one of the best tax saving schemes for senior citizens, offering regular income with tax benefits.

Features:

• Tax deduction up to Rs 1.5 lakh under Section 80C.
• Quarterly interest payouts.
• 5-year maturity period, extendable by 3 years.

10. Health Insurance (Under Section 80D)

Though primarily for health coverage, health insurance premiums offer tax benefits under Section 80D.

Features:

• Tax deduction up to Rs 25,000 (Rs 50,000 for senior citizens).
• Coverage for medical expenses.
• Critical illness plans offer additional tax benefits.

Conclusion

Choosing the best tax saving schemes depends on your financial goals, risk appetite, and investment horizon. Whether you prefer safe options like PPF and EPF or market-linked investments like ELSS and ULIPs, there are numerous tax-saving avenues available in India. By strategically investing in these schemes, you can not only save taxes but also ensure long-term financial security.