How to avoid mistakes in last minute tax saving decision?

tax saving investment options


Every investment option to save taxes has a certain role in a portfolio which every taxpayer should know. As taxpayers looking for a better option for investments in save taxes so they can avoid some mistakes by having knowledge about various tax saving options.

ELSS category of tax saving investment option helps to create a wealth in long term. Taxpayers can invest in these equity schemes through monthly SIPs not invest a huge amount at one go. This is an option where investors can get tax benefits under section 80C.

Every taxpayer should know that they choose investment options that can fill the gaps in their portfolio. Taxpayers looking for equity exposure can invest in ELSS funds. ELSS funds should also be chosen as per the taxpayers risk appetite. Holding for longer period instead of three year lock-in period should be considered by taxpayers as it can give better returns.

One the other side PPF is also a good tax saving investment option. In most cases the monthly contribution to the provident fund is more than sufficient to build up the debt portfolio of an individual’s investment portfolio.

Investment as per needs:


Public Provident Fund:                           

  • Tenure: 15 years
  • Purpose: Long-term savings.

Sukanya Samriddhi Yojana:

  • Tenure: Till girl turn 18
  • Purpose: Long-term wealth creation

Insurance Plans:

  • Tenure: Policy term
  • Purpose: Insurance Cover

Senior Citizens Saving Scheme :

  • Tenure: 5 years
  • Purpose: Regular income in retirement

National Pension System:

  • Tenure: till retirement
  • Purpose: Long-term Savings

ELSS funds:

  • Tenure: 3 years
  • Purpose: Long-term wealth creation

NSCs and Bank FDs

  • Tenure: 5 years
  • Purpose: Long-7.5-8%

Multi-year Investment:

These tax saving investment options are eligible for deduction under section 80C.

Life insurance policies requires you to pay the premium year by year for the full term of the plan so taxpayer should assess the need for life insurance cover, your ability to service the premium for the full term and your willingness to accept 5-6% returns. If these requirements are ticked then you can buy the insurance plan.

Ulips is also a multi-year investment option. The costs of new online Ulips are very low and lead to higher investor returns. Be sure you will be able to pay every year before you take this as a investment option.

ELSS funds as per needs:


Aggressive Funds:

These funds have a larger exposure to small and mid-cap stocks. This can be rewarding as well as risky.

Balanced funds:

These funds have a balanced exposure to large-cap, mid-cap and small-cap stocks.

Stable funds:

These funds have large-cap oriented portfolios. They can give stable returns.

Small saving best options:


Though interest rates have come down in recent months but small saving schemes like PPF and Sukanya Samriddhi yojana still offers 8-8.5% .

For Senior Citizens taxpayers Senior Citizens’ Savings scheme is the best tax-saving option. The scheme is for 5 years and can be extended for a period of three years once it matures. It offers 8.5% returns and the interest is paid out every quarter. The account can be opened in any post office branch and designated branches of PSU banks and select private banks. In this scheme there is an investment limit of Rs.15 Lakh per individual.

NSCs offers close to 50-75 basis points more than what fixed deposits give. The interest earned on NSCs is also eligible for deduction under section 80C.


Small Savings Schemes:

  • PPF Interest rate 8% ( tax-free)
  • Sukanya Scheme Interest rate 8.5% (tax-free)
  • NSCs interest rate 8% (Fully Taxable)
  • Senior Citizens Savings Scheme Interest rate 8.5% (fully taxable)
  • Best fixed deposit interest rate 7.5%(fully taxable)

NPS(National Pension System):

The Nation Pension System has generated a lot of interest among taxpayers after the introduction of the additional tax deduction of Rs.50,000 under the new section 80CCD(1b).NPS is a long term product and a locks up money for a very long term. If you are 30, the investment will mature in at least 28-30 years. According to the financial experts it is better to pay tax than invest in the NPS to claim tax benefits as it has a restrictive investment mandate and is not likely to match the return of equity funds.

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