Best Tax Saving Investment Options

Best Tax Saving Investment Options For 2018: Here are top 10 options

Best Tax Saving Investment Options

Best Tax Saving Investment Options For 2018: Here are top 10 options

Everybody wish to save tax and search for investment options to save tax. But don’t invest just for the sake of saving tax. While choosing an investment alternative, an investor should also take into consideration other parameters like minimum risk, maximum return, low cost, maximum tax saving, convenience etc. So if you are looking for such alternative of investment, where you can maximize your return along with tax savings, then here is the list of best tax saving investment options.

  1. Public Provident Fund (PPF): If you are a salaried class or a small business owner, you should consider the PPF as your first investment option to save tax.  PPF is the safest and secure long term investment option available in India. You can open PPF account in bank or post office. A minimum of Rs.500 and maximum Rs.150000 can be deposited in PPF account in a year. It is totally tax free and your contribution towards PPF is eligible for deduction u/s 80C. Money is locked for 15 years, however partial withdrawal  of money is allowed from the end of 6th year onward. Loan facility is also available against the PPF balance. The rate of interest on PPF for 2016-17 is 8.10% p.a. and for 2017-18 is 7.8% p.a. Interest rate has been reduced to 7.6% p.a. w.e.f. 1st January 2018.
  2. Tax Savings Fixed Deposits : Tax Saving Bank Fixed Deposit is a good option to save tax. This is very safe and secure investment option which provides a good rate of interest along with tax savings. Interest earned on tax savings fixed deposit is totally tax free. However the rate of interest on tax free fixed deposits are slightly lesser than other fixed deposits. At present, the rate of interest on tax free bank FD is about 6-7% p.a.
  3. ELSS Tax Saving Mutual Funds: Investing in ELSS Tax Saving mutual funds is also one of the best options available to those who want to invest in equities and bonds with a balance of risk and return. Investing through mutual funds allow an investor to avail the services of the professional money manager, who manage the mutual funds. Investing in stock markets through mutual funds is a market trend today. Systematic Investment Plan (SIP) is one of the best investment options available to invest in mutual funds for long term. Mutual funds provides better return than other investment options available in the market. You can claim deduction u/s 80C for investment in mutual fund and the amount received on maturity is also fully exempted.
  4. New Unit Linked Investment Plans (ULIPs): New ULIPs are also one of the best investment available in the market to save tax and maximize return. ULIPs invest in debt and equity and provides higher return. Prior to 2010, ULIPs had more than 35% premium allocation and other charges for the first year and upto 8% at later years. But these charges reduced after 2010 and even some of the ULIPs are now issued with zero premium allocation charges. So these low cost ULIPs has now become one of the best investment options. Your investment in ULIPs qualify for deduction u/s 80C and amount received on maturity is also exempted from tax.
  5. Sukanya Samriddhi Yojana: The Sukanya Samriddhi Yojana (SSY) is a girl child prosperity scheme under Beti Padhao Beti Bachao programme of Prime Minister Narender Modi. This has also become an important investment option in India. One of the key benefits of the scheme is that it quite affordable and offers one of the highest rate of interest. Initially the rate of interest was 9.10% p.a. but for the year 2016-17 it has been revised to 8.6% p.a. For Financial Year 2017-18, the rate is 8.1% p.a. Your deposit in Sukanya Samriddhi Yojana qualify for deduction u/s 80C and the amount received on maturity is also exempted from tax.
  6. Senior Citizen Saving Schemes: Senior Citizen Saving Scheme is a safe tax saving scheme which provides assured return for senior citizens. Any individual of the age of 60 years or more can open SCSS account for tax savings. Its maturity period is 5 years and the rate of interest is 8.3% p.a. which is paid at the end of each quarter. However interest on SCSS is taxable.
  7. National Pension System(NPS): NPS was introduced in 2004. It was initially aimed at government employees but subsequently extended to all citizens in 2009. Under National Pension System(NPS), subscribers invest in the funds chosen by them and at the time of retirement they get a lump sum amount depending upon the performance of the fund. NPS is a market linked product, therefore its returns depends upon the performance of the product. Any contribution made to National Pension System(NPS), both by salaried and non-salaried individual, can claim as deduction u/s 80 CCD (1):

    Finance Minister Arun Jaitley in Union Budget 2015-16 introduced a new sub-section 80CCD (1B), to provide an additional deduction of Rs.50000 for the contribution made towards NPS.

    Pension received by the employee after retirement from NPS is fully taxable. Out of the amount received in lump sum from NPS at the time  of retirement, 40% will be exempted from tax and the remaining 60% will be taxable as per the tax slabs of year of the receipt.

  8. National Saving Certificate (NSC): National Saving Certificate are issued by post office. These are similar to tax savings fixed deposit. Rate of interest on NSC is 7.6% for 5 years and 7.9% for 10 years. NSC gives the benefits of tax savings u/s 80C. Interest on NSC is taxable, however it can also be claimed as deduction as deduction u/s 80C.
  9. Life Insurance Policies: Life insurance polices are one of the the most popular investment options available for tax saving. But investment in life insurance policies is not considered good from return point of view. However, if you want to invest in insurance policies than term insurance should be preferred as it comes with low cost and risk coverage. Term insurance plans are designed for risk coverage and not for money saving purpose.
  10. Home Loan Repayment: If you still have not constructed or purchased your dream home, you can go for this option and save tax. You can take home loan for the construction, purchase, repair and renovation of the house. The amount of EMI paid can claimed as deduction to save tax. Out of the total amount of EMI, principal amount is allowed as deduction u/s 80C and the amount of interest is allowed as deduction u/s 24 out of house property income.

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