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An Overview of Tax Savings Investment Schemes

It is very important to invest in a saving scheme early in life for a secured retirement.  Tax saving investment schemes can be extremely rewarding which in turn will help to grow the wealth and one can enjoy the maximum savings possible. India has a wide range of saving schemes keeping all the section of the society in mind. Some of the schemes require limited documentation which are also backed up by the Indian Government makes it safer and secured investment. As these are long term investment schemes focused on the time in future when one will require large amount of money to fulfill the needs like retirement, marriage of a son/daughter, long awaited foreign trip, etc. There are many legitimised investments schemes which are eligible for deduction under section 80 C.

Below is the list of such investments which can help one enhance their savings.

Public Provident Fund (PPF)

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Working of PPF Scheme
  • Public Provident Fund or PPF is a long-term tax saving scheme introduced by the Ministry of Finance (MoF) is also one of the most tax efficient instrument in India. PPF is the safest investment options as it is backed by the Government of India.
  • The scheme was initially started with the aim to provide retirement security to self-employed individuals and workers in the unorganized sector.
  • People interested investing in PPF can invest minimum of Rs. 500 to maximum of Rs. 1,50,000 in one financial year can avail the benefits such as loan, withdrawal and extension of accounts.
  • The current interest from the PPF for FY 2016 – 17 is set at 8.1% that is compounded annually.
  • After a tenure period of years, PPF withdrawals will be tax free. Under PPF deposits can be done in maximum of 12 transactions.
  • Also, the loan can be availed in 3rd and 6th financial year.
  • Partial withdrawal facility is available after the 7th financial year.

 Equity Linked Savings Scheme (ELSS)

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ELSS Scheme
  • ELSS is a tax saving mutual fund which invest in equity, stocks or other equity related schemes and they help save income tax up to Rs. 1.5 lakh. The lock – in period of ELSS is of 3 years.
  • The interested investors can invest in ELSS through Systematic Investment Plans (SIP) that allows averaging the investment or one time lump sum investment.
  • ELSS is a good tax saving instrument as it qualifies for tax exemption up to Rs. 1.5 lakh.
  • There can be no sudden outflow as the scheme is locked for the period of 3 years.
  • ELSS mutual funds are a market linked product, they are of high risk however, and they are usually high return assets however there is no guarantee of returns.
  • ELSS is a good investment scheme for the people who are immune to the high risk investment.

National Pension Scheme (NPS)

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National Pension Scheme
  • National Pension Scheme is introduced by the Government of India which is aimed for the unorganized sector of the country and also for the working professionals to have an income even after the retirement.
  • The objective of NPS is to provide old age income. It also ensures reasonable market based returns over long run.
  • NPS is based on a Unique Permanent Retirement Account Number (PRAN) allotted to all the subscribers upon joining NPS.
  • The PRAN number allotted to the subscriber will remain the same irrespective of change of employment and location.
  • It’s a flexible scheme as the amount and contribution can be changed as per the subscriber requirement.
  • NPS can be operating on extremely low cost with 0.01% as Fund Management Charge. It can also be considered as one of the least expensive saving scheme.


Investment Interest Lock-in Period Risk Profile
NSC 8.1% (guaranteed) 5 years Risk-free
ELSS funds 12% to 15% (expected) 3 years Market-related risks
PPF 8.1% (guaranteed) 15 years Risk-free
NPS 8% to 10% (expected) Till retirement Market-related risks
EPF 8% to 12% (guaranteed) 5 years Risk-free
ULIP 5% to 11%(dependent on the exact scheme) 5 years Market – Related Risk


Employees Provident Fund (EPF)

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How EPF scheme works
  • Employees Provident Fund (EPF) is an important tool of retirement planning .One of the most important savings platforms for the employees working in Government, Public and Private Organization. It is referred as the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 which extends to the whole of India except Jammu and Kashmir.
  • For the year 2016 – 17, the EPF interest rate is 8.65%.
  • 12% of the employee’s salary will be deducted and will be deposited on the EPF account.
  • It also provides online service for the pensioners.
  • All employees whether Government, Public or Private can be enrolled in this facility.
  • EPF gives financial security as the funds in the account cannot be withdrawn easily hence, saving is ensured.

National Savings Certificate (NSC)

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All details about the NSC investment scheme
  • National Savings Certificate or NSC is a Government backed saving scheme. It is typically used for small savings and income tax saving investment in India. And the scheme is eligible for tax deduction under Section 80 C.
  • There is no limit set for the purchase of NSC’s nut investments up to Rs. 1.5 lakh can earn a tax break because of its eligibility under Section 80 C.
  • The current interest rate of NSC is 8.1% per annum.
  • The scheme also saves income tax up to Rs. 1.5 lakh.
  • Bank loans are available for the subscribers of NSC.
  • The maturity of the certificate is set to 5 to 10 years from the date of purchase.
  • Very attractive returns, a nominal investment of Rs.100 will yield Rs.234.35 in 10 years.
  • These accounts can be transferred from one person to another.
  • National Savings Certificate can be used as a guarantee while taking loan from a bank.

Unit Linked Insurance Plan (ULIPs)

All details about the ULIP investment scheme
All details about the ULIP investment scheme
  • ULIP is basically an amalgamation of insurance and investment. Unit Linked Insurance Plan is a very popular investment cum insurance instrument across the globe. As the scheme has features of both investment as well as insurance it is also known as integrated financial product. In another words, Life Cover, Investment and Tax Benefit together known as ULIP.
  • The amount invested in ULIP will be divided into two parts. One part will be kept exclusively for the purpose of buying the life insurance cover and the remaining part will be kept for the investment.
  • By investing in ULIP, one gets the exposure of money market and also it helps in long term wealth creation. Also, this is the only investment scheme which offers best of both the world.
  • ULIP scheme is flexible in nature because of the various factors like Life Cover and Fund Option can be chosen by the customer himself.
  • The reason behind the popularity of ULIP scheme because of its transparency.
  • ULIP offers tax exemption under the Section 80 C of the income tax act.

This scheme is best suited for the people who have a lower risk appetite but wants to grow money anyway.

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