As the financial year-end approaches on march 31, many taxpayers, especially middle-class earners, start looking for ways to save on taxes. If you're among them, investing in small saving schemes can help you reduce your taxable income while ensuring secure and stable returns.
Under the old tax regime, several government-backed schemes qualify for deductions under Section 80C of the Income Tax Act, offering an excellent opportunity to save tax while building wealth. Let’s take a look at some of the most beneficial options:
1. Public Provident Fund (PPF)
One of the most popular and secure investment options, the PPF is ideal for those looking for long-term savings with tax benefits.
- Tax Benefit: Investments up to ₹1.5 lakh per year are eligible for deduction under Section 80C.
- Interest Rate: Currently around 7.1% (compounded annually), backed by the government.
- Lock-in Period: 15 years, with partial withdrawals allowed after 5 years.
- Tax-Free Returns: Both the interest earned and the maturity amount are completely tax-free.
2. sukanya Samriddhi Yojana (SSY) – For girl Child
If you have a daughter below 10 years, this scheme is one of the best options for her future education and marriage expenses.
- Tax Benefit: Deposits up to ₹1.5 lakh per year are eligible for 80C deduction.
- Interest Rate: Around 8% (compounded annually), among the highest for small savings schemes.
- Lock-in Period: Maturity after 21 years, with partial withdrawals allowed for education expenses after 18 years.
- Tax-Free Returns: Interest earned and maturity proceeds are completely tax-exempt.
3. National Savings Certificate (NSC)
A great option for fixed-income investors, NSC is a secure scheme offering guaranteed returns.
- Tax Benefit: Investment up to ₹1.5 lakh per year qualifies for 80C deduction.
- Interest Rate: Currently 7.7% (compounded annually, but payable at maturity).
- Lock-in Period: 5 years.
- Tax Treatment: The interest earned is taxable but can be reinvested under 80C in the first four years.
4. 5-Year Tax-Saving Fixed Deposit (FD)
If you prefer safe and hassle-free investment, a 5-year tax-saving FD in banks is a good choice.
- Tax Benefit: Deposits up to ₹1.5 lakh qualify under 80C.
- Interest Rate: Around 6.5% to 7.5%, depending on the bank.
- Lock-in Period: 5 years (premature withdrawal not allowed).
- Tax Treatment: Interest earned is taxable as per your income slab.
5. Employee Provident Fund (EPF) Contributions
If you are a salaried employee, your EPF contributions automatically qualify for tax benefits.
- Tax Benefit: Employee contributions up to ₹1.5 lakh are eligible under 80C.
- Interest Rate: Around 8.15%, compounded annually.
- Lock-in Period: Until retirement (withdrawal allowed under certain conditions).
- Tax Treatment: If withdrawn after 5 years of service, the maturity amount is tax-free.
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