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Tax-saving investments have now become an essential aspect of one's financial planning. There are certain investment schemes available in the market that exempts the taxpayers from paying taxes and thus, allowing them to plan their finances in a better way.

Here is the list of best 5 investment options that allow working professionals to save taxes without spoiling their future returns.

1. Equity-Linked Savings Schemes (ELSS)

The equity-linked saving scheme is a kind of mutual fund scheme that primarily invests in the stock market and equity to generate high returns. ELSS simultaneously provides the dual benefit of capital appreciation and tax savings. Investments up to ₹1.5 lakh is eligible for tax deduction under section 80C of the Income Tax Act, 1961.

Benefits of investing in ELSS

  • With the lowest lock-in period of 3 years, ELSS provides higher returns.
  • ELSS offers transparency and ease of investment as one can track his/her investment online in a simple and hassle-free way. 

List of ELSS Funds you can invest in

  • Canara Robeco Equity Tax Saver
  • Mirae Asset Tax Saver Fund
  • Invesco India Tax Plan
  • BOI AXA Tax Advantage Fund
  • Axis Long Term Equity Fund

2. Public Provident Fund (PPF)

The Public Provident Fund is one of the most popular savings-cum-investment schemes that are ideal for those investors who are not willing to take risks and expect stable returns. PPF offers tax benefits on both your investment and returns, which makes it a compelling choice. The entire value of PPF investment can be claimed for tax waiver under section 80C of the Income Tax Act, 1961. Investing in a government fund provides accumulated returns at the end of the tenure that lasts for 15 years, but if required, an investor can choose to extend this tenure. 

Benefits of investing in PPF:

  • PPF is a government-backed scheme that provides risk-free returns. 
  • Investors are allowed to partially withdraw money after the completion of 5 years.
  • Investors can avail loans (up to 25%) against their PPF balance at the end of the second year.

3. Unit linked insurance plan (ULIP)

Unit Linked Insurance Plan (ULIP) let investors enjoy the benefits of both investment and insurance. Premiums paid for ULIPs are eligible for a deduction under Section 80C of the Income Tax Act, 1961.

Benefits of investing in ULIP

  • You can choose from various investment tools like stocks, debt funds, equity funds, etc.
  • ULIPs come with a lock-in period of 5 years, which keeps you invested for a longer tenure. 

List of ULIP you can invest in

  • Bajaj Allianz Future Gain
  • Canara HSBC Grow Smart Plan
  • PNB MetLife Smart Platinum 
  • HDFC Life ProGrowth Plus
  • SBI Life Wealth Assure

4. National Saving Certificate

The National Savings Certificate is a fixed income investment scheme that one can open in any post office. It comes with a fixed maturity period of 5 years. There is no maximum limit on the purchase of NSCs, but only investments of up to Rs.1.5 lakh can earn you a tax break under Section 80C of the Income Tax Act, 1961. The current rate of interest is 6.8% per annum, however, the interest rate is subject to periodic change as per the Ministry of Finance.

Benefits of Investing in NSC

  • You can invest as low as Rs.100 (as an initial investment) with no maximum limit.
  • The investor will receive the entire corpus value on maturity.
  • Investments done in NCS can be transferred to another family member in case of the investor’s demise

5. Fixed Deposits

A fixed deposit refers to an investment scheme that banks and non-banking financial companies offer to their customers. Thanks to its great returns, fixed deposits are very popular in India. If an individual opts for this scheme, (s)he can claim tax exemption of up to Rs. 1.5 Lakhs.

Benefits of Investing in a Fixed Deposit

  • Investors will get an assured return on their fixed deposits and there is no risk of principal loss.
  • Fixed deposits are free from market fluctuations.
  • Ranging from 7 days to 10 years, investors can opt for maturity periods as per their preferences and needs.

Before investing your hard-earned money in any of the above plans, do consider other factors such as safety, liquidity and returns to pick the right choice.

Naval Goel is the founder of He is an Associate Member of the Indian Institute of Insurance`, Pune. He has been authorized by IRDA to act as a Principal Officer of Insurance Web Aggregator.
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