Key Features of Tax Saving Investments

• Tax Deductions: Investments qualify for deductions under various sections of the Income Tax Act.
• Wealth Creation: Many options offer potential for capital appreciation and interest earnings.
• Lock-in Periods: Some investments have mandatory lock-in periods, promoting long-term savings.
• Diversification: A range of options allows for portfolio diversification based on risk appetite.
• Government Backing: Some schemes are government-backed, providing safety and security.

Types of Tax Saving Investment Instruments

Equity Linked Savings Scheme (ELSS)

• • Equity mutual funds that offer tax deductions under Section 80C.
  • Shortest lock-in period of 3 years among 80C options.
  • Potential for high returns, but with market risks.

Public Provident Fund (PPF)

• • Government-backed long-term savings scheme with tax benefits under Section 80C.
  • Fixed returns and a 15-year lock-in period.
  • Tax-free interest and maturity proceeds.

National Savings Certificate (NSC)

• • Government savings bonds that offer tax benefits under Section 80C.
  • Fixed interest rate and a 5-year lock-in period.
  • Interest is taxable, but reinvested interest qualifies for 80C.

Tax-Saving Fixed Deposits (FDs)

• • Fixed deposits with a 5-year lock-in period, offering tax benefits under Section 80C.
  • Fixed interest rates, which vary by bank.
  • Interest earned is taxable.

Unit Linked Insurance Plans (ULIPs)

• • Insurance and investment plans that offer tax benefits under Section 80C.
  • Part of the premium is used for insurance coverage, and the rest is invested in market-linked funds.
  • Subject to market risk.

National Pension System (NPS)

• • Market linked retirement savings plan regulated by the government, that offers tax benefits under section 80C and 80CCD (1B).
  • Offers equity and debt allocation with flexibility.
  • Partial withdrawals and tax benefits available.

Sukanya Samriddhi Yojana (SSY)

• • • Government savings scheme for the girl child, offering tax benefits under Section 80C.
    • High interest rates and tax-free maturity proceeds.
    • Long-term investment until the girl child turns 21.

Benefits of Tax Saving Investments

• Reduced Tax Liability: Lowers taxable income, resulting in tax savings.
• Wealth Accumulation: Helps build a financial corpus over time.
• Financial Discipline: Encourages long-term savings and investment habits.
• Goal-Oriented Savings: Facilitates achieving financial goals like education, marriage, or home purchase.
• Portfolio Diversification: Offers a variety of investment options to suit different risk appetites.