ELSS mutual funds
Equity Linked Saving Schemes give you full tax saving benefits under Section 80C. Apart from helping you save tax, ELSS funds also grow your wealth for the long term as they invest in equities. They also give you the benefit of small monthly contributions instead of a lump sum amount, which helps reduce the effects of volatile equity markets. ELSS funds, out of all the Section 80C options, have the lowest lock-in period of three years. Take care to select the right funds besides reviewing them regularly.
Equity Linked Saving Schemes give you full tax saving benefits under Section 80C. Apart from helping you save tax, ELSS funds also grow your wealth for the long term as they invest in equities. They also give you the benefit of small monthly contributions instead of a lump sum amount, which helps reduce the effects of volatile equity markets. ELSS funds, out of all the Section 80C options, have the lowest lock-in period of three years. Take care to select the right funds besides reviewing them regularly.
5-year bank FDs
Bank fixed deposits (FDs) are a favourite, mainly because of the high safety. For tax-saving purposes, you have a five-year lock-in deposit scheme where you get tax exemption up to ₹1 lakh. They offer slightly higher interest rates compared to normal FDs (0.25-0.5 per cent higher).
Bank fixed deposits (FDs) are a favourite, mainly because of the high safety. For tax-saving purposes, you have a five-year lock-in deposit scheme where you get tax exemption up to ₹1 lakh. They offer slightly higher interest rates compared to normal FDs (0.25-0.5 per cent higher).
But there is no liquidity — premature withdrawal is not possible, even
if you’re willing to pay a penalty. Next, the interest earned is
taxable.
Public Provident Fund
PPF is a good option to save tax while incurring no tax on the interest too. Returns are linked to the previous year’s bond yields and are thus liable to change.
PPF is a good option to save tax while incurring no tax on the interest too. Returns are linked to the previous year’s bond yields and are thus liable to change.
The interest is tax-free; and you can do a lumpsum or small regular
investments. The downside is that the convenience of online investing is
limited. The lock-in period is long — 15 years, and you can extend it
for five-year blocks. PPF accounts offer you some liquidity, subject to
conditions.
National Savings Certificate
You can invest in NSC via your local post office and can claim tax benefit up to ₹1.5 lakh. NSC interest rates are fixed in April every year. The current rate is 8.5 per cent for five-year lock-in and 8.8 per cent for 10-year lock-in. The interest is taxable. However, one key difference is the interest is re-invested. If the reinvested interest takes the total beyond the ₹1.5 lakh limit, you will have to pay tax on the additional amount.
You can invest in NSC via your local post office and can claim tax benefit up to ₹1.5 lakh. NSC interest rates are fixed in April every year. The current rate is 8.5 per cent for five-year lock-in and 8.8 per cent for 10-year lock-in. The interest is taxable. However, one key difference is the interest is re-invested. If the reinvested interest takes the total beyond the ₹1.5 lakh limit, you will have to pay tax on the additional amount.
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