How much you save is certainly more important than how much you earn. And most people know taxes are expenses that can eat your annual earnings. However, with the correct tax planning, you can reduce your tax liabilities in any given financial year. Tax planning is a legitimate way of utilising various tax exemptions, deductions, and benefits to ensure saving on taxes. Thus, it should be an integral part of your finances.

How can you save

Taxpayers in India are provided with a number of options to reduce their tax liability under the various sections of the Indian Income Tax Act, 1961. Out of these tax-saving options, those available under Section 80C of the Income Tax Act are the most popular. The section includes numerous investments and expenses that individuals and HUFs can claim deductions on – up to the upper limit of INR 1.5 lakh in a fiscal year.

Investment Options

Some of the investment options under the Section 80C are


5-Year Bank  Fixed Deposit

Tax-saving FDs are like regular FDs, the only difference is that it comes with a lock-in period of 5 years. As one of the best tax-saving investment plans, it offers tax-free income. Thus, investing in these FDs is suitable for those who want to secure their money over a long period of time while consuming lower risks. The minimum investment limit for tax-saving FDs is INR 1000 and one can claim up to INR 1.5 Lakh under Section 80C of the Income Tax Act. However, it does not allow premature withdrawal. 


PPF   (Public Provident Fund)

Backed by the Government of India, PPF is one of the best tax-saving investments for secure post-retirement financial freedom. It is an investment vehicle that falls under the EEE (Exempt-Exempt-Exempt) category. This means that the contributions made towards PPF amount, interest earned, and maturity proceeds are all tax exempted at the time of withdrawal.

Any salaried or non-salaried Indian citizen can open a PPF account with a minimum amount of INR 500 and a maximum of INR 1.5 lakh in a year. However, a HUF is not eligible for starting a PPF account. Though the local-in period of the account is 15 years, it can be further extended to another 5 years. Also, partial withdrawals are allowed every year, after the completion of the first 7 years. Since it is offered by the Government of India, it is safe, secure, with minimal risk involved.



National Savings  Certificate

This fixed-income investment scheme is ideal for mid-income investors to make investments while saving on income tax. The government has promoted this savings scheme for individuals, thus, HUFs and trusts are not eligible for investing in it. One can claim tax deduction up to INR 1.5 lakh under section 80C of the Income Tax Law. When you purchase an NSC, the return earned on it is added back to the initial investments and is eligible for tax exemption. National Savings Certificate is a low-risk tax-saving investment option with a guaranteed return on investments.


National Pension  System

A social security initiative by the Central Government, NPS is a significant investment option for acquiring financial freedom post your retirement. This pension programme is open for working professionals from the public, private, and unorganised sectors (except armed forces). You can invest in an NPS account at regular intervals during the tenure of your employment. 

Partial withdrawals are allowed only after the completion of 15 years. After your retirement, you can take out a specific percentage of the corpus. And you will receive the remaining amount as a monthly pension. The National Pension Scheme is available across different jobs and locations with several tax benefits under Section 80C and Section 80CCD of the Income Tax Act.



ELSS  Funds

ELSS Funds or Equity Linked Savings Scheme are tax-saving equity mutual funds under Section 80C. ELSS Funds differ from other investment vehicles as it provides both tax deductions and wealth accumulation over time. When you invest in these funds, you can claim a tax rebate of up to INR 1.5 Lakhs while saving around INR 46,800 per annum in taxes. 

ELSS Funds have the shortest lock-in period of three years and have the potential to offer 2 times returns of FD and PPF. It also allows investing a small amount every month (SIP). Investing in ELSS mutual funds is transparent and hassle-free as you can track your investment online easily

Lock-in Period
5-Year Bank Fixed Deposit
5 years
Public Provident Fund (PPF)
7% to 8%
15 years
National Savings Certificate
7% to 8%
5 years
National Pension System (NPS)
12% to 14%
Till Retirement
ELSS Funds
15% to 18%
3 years