Tax Saving Investments

4 mins read
by Angel One

While earning and accumulating wealth is essential, it is just as important to find the right ways to save wealth. A crucial means by which most professionals today strive to expand their savings is by investing in a variety of tax saving schemes. Through these tax saving schemes, not only can you reduce your tax liability and grow your savings, but also avail benefits such as market-linked returns and building a substantial retirement corpus.

If you too are on the market looking for options to slash your tax burden, here are some of the most popular and effective tax saving schemes to suit your needs. The contributions and payments for each of these schemes can be claimed as a considerable tax deductions.

Public Provident Fund

Public Provident fund, also known as PPF, is one of the most popular tax saving schemes in the country. It serves as both a means to accumulate long-term savings for the future as well as an instrument for investment. For a PPF account, the minimum amount of deposit required is Rs. 500 while maximum amount of deposit is up to Rs. 1,50,000 in a single financial year.

A Public Provident fund account comes with an attractive interest rate of 8% per annum and is known for its low-risk, high-returns investment features. In terms of tax benefits, the contributions to your ppf can be claimed as deductions. Moreover, it is exempted from wealth tax and its returns are entirely tax free.

Employee Provident Fund

For salaried individuals looking to save tax while building up a financial tax-free corpus, the Employee Provident Fund is another excellent tax saving scheme. Every month, 12 percent of an employee’s salary is contributed to the EPF account and the amount is also matched by the employer. You also have the option of raising your own employee contribution to up to 100% of your Basic+DA and thereby turn your EPF into a Voluntary Provident Fund or VPF.

The returns from an EPF are substantial and are the result of an attractive interest rate of 8.65%. With respect to tax benefits, employer contributions to EPF are tax-free, and the employee contributions are tax-deductible under Section 80C of the Income Tax Act. Moreover, your EPF investments, the interest earned and the returns you eventually withdraw after the mandatory specified period  of 5 years are all exempted from Income Tax.

National Pension Scheme

Another popular tax saving scheme for Indian professionals, both in the private and public sector, is the National Pension scheme, or NPS. It is essentially a government backed tax saving scheme that helps you save for retirement, avail investment options and and enjoy tax benefits. With an NPS account, you can make regular contributions to your retirement corpus which can only be accessed after your retirement and a part of which is disbursed as pension.

As a salaried employee, if your NPS contribution is up to 10% of your salary, it is exempted from taxable income under Section 80 CCD (1) with an upper limit of Rs 1.5 lakhs. Apart from this, with NPS you also become eligible to avail up toRs. 50,000 as deduction under Section 80CCD (IB).

Equity Linked Saving Scheme

For those seeking to save on taxes with a specific focus on investment, the variety of Equity Linked Saving Schemes, or ELSS might be the way to go. Out of all tax-saving instruments, ELSS is known for having the lowest lock-in period at just 3 years. With a minimal investment of as low as Rs. 500, you can invest in a range of equity funds and receive long-term, consistent returns as high as 15 to 18% per annum. You can also diversify across various ELSS schemes based on your investment interest and risk appetite.

Apart from these attractive investment returns, you can also enjoy tax deductions of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961.

Read More About What is ELSS Mutual Fund?


All of these tax saving schemes can prove extremely beneficial in your tax-saving efforts, particularly in the long run. However, if it is wealth creation that you wish to focus on, it is important to sign up with a reliable brokerage firm that can guide you in your investment journey ahead.

To that end, Angel One provides investors and traders with a technology-enabled DEMAT and trading account as well as extensive technical and fundamental research guidance. Moreover, you can also practice developing new trading strategies with their tools such as their trial trading account.