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Every year while filing the ITR, people look for the options where the tax can be saved. There are various tax saving investments based on the factors like returns, safety, flexibility, liquidity, costs, transparency, ease of investment and taxability of income. It is very important to keep all these parameters while making an investment as it maintains the balance between the needs of an investor and what the investing instrument can give. Some of the best tax saving instruments for a maximum deduction of up to ₹1,50,000 under Section 80C are as follows:
Table of Contents
Best Tax Saving Instruments under 80C
- Equity Linked Savings Scheme (ELSS)
- Public Provident Fund (PPF)
- Life Insurance Premium
- House Loan Principal amount
- 5 year fixed deposits with banks and post office
- National Pension Scheme
- Employee Provident Fund (EPF)
- National Saving Certificates and deposit in Sukanya Samriddhi Account
- Unit Linked Insurance Plans (ULIP)
- Deposited amount under Senior Citizens Saving Scheme (SCSS)
Below is the comparison of the returns from some of the main tax saving options.
Average Returns from Major Tax Saving Options Comparison
For reference, have a look at the expected returns from different tax-saving investment products each done for different tenures.
|ELSS||19.20% (for 3-years)|
|PPF||7.80% (per annum)|
|EPF||8.65% (per annum)|
|SCSS||8.3 (per annum)|
|ULIP||11.70% (for 3-years)|
|Fixed Deposits||7.20% (for 5 years)|
The returns from different products clearly show that age-old pattern of investing in Fixed Deposits is not giving much return. However, on the other hand, ELSS is proving to be a great option to save on tax. In the case of ELSS, the investment can be done in SIPs as well as in lump sum, AMFI data has shown that nearly 50% of the total inflows into the ELSS category happens in the last three months of the financial year. To be particular, in the month of March itself, the total inflows account for 22-25%. Thus, instead of SIP, the investors have chosen to invest a lump sum amount in ELSS at the end of the financial year.
Let us some of the best ELSS funds where the investment has shown great return rate for the time-period of 3-years.
Best ELSS Funds in India
What makes ELSS Tax Saving Mutual Funds Different?
Investing in ELSS mutual funds has become easier with the e-KYC option which saves the time of the investor. However, the real benefits of investing in ELSS should be known. It is important to note that ELSS funds are equity schemes and hence the stability of the returns is given more importance than the profit amount. So, if the 3-year and 5-year performance of the funds is considered, the best ELSS funds can be easily identified based on the Value Research star ratings which are given based on the stability of the returns and the long-term risk-adjusted performance.
The saying that patience and clear vision along with sincerity is the key to success somehow matches with ELSS. If the investor is clear about the financial goals, they can get amazing returns. However, the list of options for tax saving is long, it is always advisable to choose the option that is suitable as well can help save the maximum.
Disclaimer – Mutual Funds are subject to market risks. Please read the scheme related documents carefully before investing.