Which is the Best Tax Saving Investment?

Saving money on tax is quite literally of the utmost importance in today’s day and age and fortunately enough, there are a large number of instruments that can help do just that. An ever-increasing number of people, nowadays, are investing in instruments or tools that assist them in enhancing their savings. If you so wish to start investing for the purpose of saving on taxes, below is a list of such tax-saving investments:

Public Provident Fund

Investing in Public Provident Funds can draw maximum tax savings with complete safety as there is ample of ease and flexibility in PPF accounts. Almost every major bank provides this facility to its customers and the interest paid on PPF accounts is tax free. PPF accounts can be opened for tenures of up to 15 years. PPF ranks number one among the safest investment selection an Indian investor can make. It is because the funds invested remain with the government itself and the security against which it is benchmarked is the 10-Year Government Bond.

Employee Provident Fund (EPF)

It is mandatory for employers to subtract 12% off their employees’ salaries for contributing to the employee’s EPF account. The same contribution is made by the employer himself and the investment is entitled for tax deduction. The money invested in EPF can be above the prescribed 12% and the excess amount invested into PPF is also non-taxable. Transferring an EPF from one job is quite simple. You just have to withdraw the EPF after leaving a job.

The money invested in PPF will be locked until the investor retires. The overall amount invested in PPF can be withdrawn by the investor also if he / she has been unemployed for at least two months. EPF is quite high on the list of the safest investment choices because the case is similar to that of the PPF, in which the funds remain with the Indian government, hence making it safer for reluctant investors.

Tax Saving Fixed Deposit

As in the case with other fixed deposits, the interest rate applicable to Tax Saving Investments Fixed Deposits is the same. However, investors are not able to withdraw their funds for a minimum of five years or before the maturity of the scheme. Good news is that the interest earned on Tax Saving Fixed Deposits is completely tax free, which ensures that the customers enjoy maximum benefits.

National Pension Scheme

The National Pension Scheme has the probability to ensure a safe and secure retired life in addition to executing tax savings. Investments made in the National Pension Scheme can be claimed as deductions under Section 80C of the Indian Income Tax Act. However, investors can only access the funds after they have retired from professional life.

National Saving Certificates

National Saving Certificates (NSCs) are very much similar to Tax Saving Fixed Deposit. The key difference being that the returns received from NSCs are lower than that provided by Bank Fixed Deposits. Even so, they are regarded as safer options in comparison to fixed deposits because the funds are under the custody of the Indian government. Tax benefits are also be available with National Saving Certificates under Section 80C of the Income Tax Act.

Term Insurance

Now this is most obvious because saving on tax is relatively easy thanks to Term Insurance schemes. While investors in term insurance policies cannot gain any youth amounts, the future of the policyholder’s family will be secured in his unfortunate death, owing to the life cover provided by the policy. Additionally, these policies are appreciably cheaper than most other life insurance policy, making them a reasonably decent option for tax saving investments.