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Tax Saving Investments: Importance and Available Avenues


Investments are beneficial from both a fund building and a tax saving perspective. Making an investment helps to ensure higher amount of savings from a short term as well as a long term view.

Whenever you are looking to invest in a particular instrument, factors like inherently low risk along with higher capital gains and better tax planning should be given importance. A smart way to achieve this is to take professional assistance from finance experts who have a good understanding of the market and who can create a diverse investment portfolio for you by keeping these factors in consideration.


Tax Saving Instruments

Tax Saving Bonds

·         Debt securities issued by PSUs

·         Interest earned is non-taxable

·         Give preference to AA and AAA rated bonds

·         It is ideal to let the lock-in period get completed as returns on maturity are guaranteed


Equity Linked Savings Scheme

·         Returns on investment are tax free under section 80C of Income Tax Act.

·         Moderate amount of risk involved but the returns are higher in comparison to Fixed Deposits

·         Lock-in period is just 3 years


5-year and 10-year National Savings Certificates

·         Guaranteed returns on maturity

·         Interest earned is taxable as per an individual’s income slab

·         There is no ‘tax deducted at source’


                                                       Rajiv Gandhi Equity Savings Scheme

·         This scheme has been approved on September 21st, 2012 by Finance Minister Mr P Chidambaram

·         Motive is to encourage first time investors to adopt equity culture

·         Lock-in period of just 1 year

·         Maximum allowed investment is 50,000/- and 50% of that amount is eligible for availing tax benefits under section 80CCG of Income Tax Act, 1961.



Tax Saver Fixed Deposits

·         As per section 80C, 5-year Fixed Deposits are exempted from tax

·         Interest rates range between 8.5-9%

·         Exemption is applicable within the 1,00,000/- limit which also includes other investments



Life Insurance

·         Tax benefits under section 80C

·         As per section 10(10D), if the premium every year is less than 10% of the sum assured, then the maturity amount is exempted from tax.



Health Insurance

·         Under Section 80D, for policies of self, spouse or children, tax benefits of up to 15,000/- is available. These benefits can go up to 30,000/- if you are paying for the health insurance policies of your parents as well.

·         Benefits on parents’ health policies is dependent on two factors -

Your age should be under 65 years and the premium payment should be made via cheque or credit card only.


Public Provident Fund

·         Excellent retirement planning investment

·         Interest rate of 8.7% for 2013-14 with a maximum investment of 1,00,000/- allowed

·         Additional benefits:  Option of taking loans from your PPF from the beginning of 3rd year onwards till the end of 5th year. You can also make withdrawals from the 6th year onwards.

·         Under section 80C, amount on maturity including interest is non-taxable.


To know more about various tax saving investments Click Here

Author Bio:

It’s All About Money is a leading personal finance blog in India which provides simple practical information about money, banking and managing finances. It’s All about Money tries to answer the what, why and how about money and everything around it.






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