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Best Investment Options to Help Save Tax

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Tax planning is a key component of a financial plan. Whenever we make investments, one of the thoughts in our mind is "Will it be eligible for tax benefits? This article is an attempt to make the readers identify some popular tax friendly investments.

There are various investment options under section 80C, 80CCC and 80CCD of Income Tax Act that allow deductions from our total income (up to Rs. 150,000). When you utilize these provisions, the net taxable income reduces resulting in lowering tax liabilities. A gist of the various forms of investments is given below:

(A) Investments under Section 80C

1. Public Provident Fund (PPF)

It is one the most conservative and risk-free avenue of investment where an interest is accumulated annually, and the maturity period is 15 years. Minimum amount of contribution is Rs. 500. In case of Public Provident Fund Account, the principal invested, interest earned and maturity amount are all tax-free.

2. Tax Saving Fixed Deposit

Tax saving fixed deposits are similar to other FDs as they offer assured returns. However, these investments provide tax saving benefits under Section 80C and also have a 5 year lock-in period.

3. Life Insurance Premiums

Any amount paid towards LIP for yourself, your spouse or your children can be included in Section 80C deduction. Premium paid for more than one insurance policy can also be claimed.

4. Equity Linked Savings Scheme (ELSS)

ELSS Funds is a category of equity mutual funds that offer tax savings. Investments in ELSS are locked for three years.

5. National Savings Certificate (NSC) (VIII Issue)

NSC is a tax saving instrument with a maturity period of Five years. Minimum investment amount is Rs. 100, there is no maximum amount (Interest income is chargeable to tax). Note: Ten Year NSC has been discontinued from April 2016.

6. New Pension Scheme

You can invest Rs. 500 per month or Rs. 6000 p.a. in NPS. The returns from NPS varies in the range of 4% to 10%. There is no minimum contribution requirement in NPS but it is recommended to invest Rs 1000 per annum to earn a reasonable pension after retirement.

7. Sukanya Samriddhi Scheme

Protection and financial stability of a girl child is a matter of concern in our country hence, the Sukanya Samriddhi Account, a special deposit scheme was launched by PM Narendra Modi on 22nd January 2015 for girl child. Under this scheme:

1. Minimum deposit amount is Rs. 1,000 and maximum is Rs. 1,50,000 per year Under Section 80C.

2. Money to be deposited for 14 years.

3. Interest rate 7.60% per annum 

4. Per girl child only single account is allowed (maximum 2 girls). In case of twins will be extended to third child.

(B) Section 80CCC

Under this section, the amount paid towards premium for any annuity plan of an insurance company is allowed as a deduction.

(C) Section 80CCD(1) & 80CCD(1B)

Section 80CCD of the Income Tax Act allows for tax deduction benefits for investments made into various pension schemes including NPS and Atal Pension Yojana

Additional Deduction upto Rs 50,000 is allowed while making contribution to new pension scheme apart from 80C limit of upto Rs 1,50,000/-

Illustration: Mr. Malhotra's Gross Total Income for FY 2022-23 is Rs. 12,50,000. He invests in following instruments: PPF Rs. 45,000, Paid LIP Rs. 15,000, Equity Linked Savings Scheme (ELSS) Rs. 75,000, and Tax Saving FD Rs. 30,000.

Computation of Net Income:

Gross Total Income



Less: Deductions us 80C


Rs. 45,000



Rs. 15,000



Rs. 75,000



Rs. 30,000



Rs. 165,000


Maximum deduction allowed

  Rs. 1,50,000

Rs. 1,50,000

Total Income/ Net Income

  Rs. 11,00,000

Rs. 11,00,000

(D) EMI for Housing Loans

If an individual has availed a housing loan, the EMI payment will be eligible for availing tax benefits. Here are the components:

1. Home Loan Principal Repayment: The EMI that you pay every month consists of two components - Principal and Interest.

a. The principal component qualifies for deduction Under Section 80C upto Rs. 1,50,000.

b. The interest component can save you tax, but under Section 24, under the head "Income from House & Property" upto Rs. 2,00,000.

2. Stamp Duty and Registration Charges for a home can be claimed as deduction under section 80C in the year of purchase of the house.

We have tried to separate the chaff from the grain by giving most tax friendly investment options, to help you utilize your earnings better and better your financial health.

You may be entitled to certain applicable tax benefits on your premiums and policy benefits. Please note that all the tax benefits are subject to tax laws prevailing at the time of payment of premium or receipt of benefits by you. Tax benefits are subject to changes in tax laws.


ARN:- Jan23/Bg/03G

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