Tax Saving Investments and their Features

Nutan Gupta Nutan Gupta 24th August 2023 - 12:42 pm

This is the time of the year when you start getting calls from the HR of your company asking for investment declarations. If you have not made any investments yet, here is the list of instruments where you can invest.

Instrument	Investment	Section of IT Act	Lock-in Period	Returns	Risk	Taxation at Maturity
ELSS	ELSS is a type of mutual fund scheme where most of the fund corpus is invested in equities or equity-related products.	80C	3 years	Not fixed, depend upon the performance of equity market. However, in the past, ELSS has given average returns of 12-14%.	Carries some risk	Tax-free
PPF	It is a type of investment which is provided by the Government of India	80C	15 years	The rate of returns changes as per government policies. Current returns - 8.1% compounded annually	Risk-free	Tax-free
NSC	NSC are bonds issued by the government for small savings and one can purchase these bonds from post offices.	80C	10 years	The interest rate on NSC is decided by the government every year. It is linked to the yield of 10-year government bonds. The current interest rate is 8%.	Low Risk	Interest is Taxable
Pension Mutual Funds	Pension Mutual Funds invest 40% of the money in equity and 60% in debt instruments.	80C	Until you reach the age of 58	The returns in pension mutual funds are not fixed as it depends on the performance of the equity and debt market. Pension mutual funds have given an average return of 8-10% for a 5-year and 10-year period.	Carries some risk	Tax-free
Tax Saving FD	It is a special fixed deposit made with any bank.	80C	5 years	The interest rate varies from one bank to another. It usually ranges from 6.5-7.5%.	Risk Free	Interest earned is taxable
Rajiv Gandhi Equity Saving Scheme	Exclusively for first time retail investors. Individuals with an annual income below Rs. 12 lakh can invest.	80CCG	3 years	Depends on the performance of equity markets.	Carries some risk	50% of the invested amount