15 Best Tax Saving Schemes in India

It is essential to save tax to plan an investment scheme. However, due to a lack of knowledge, people generally fail to claim a tax deduction from their taxable income. In India, an individual may find several tax-saving schemes that save tax and offers investment opportunities. An investor may come across various tax saving schemes, such as ULIP, National Saving Certificate, NPS, and many more.

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Various taxpayers plan to save some extent of tax, but only some succeed, while the rest compel to pay taxes due to the unavailability of investment planning.

Best Tax Saving Schemes in India

Here are some best tax-saving schemes that an investor can look up to to save their hard-earned money and have a decent corpus to safeguard the future of themselves and their family.

  1. Unit Linked Insurance Plan

    The Unit Linked Insurance Plan or ULIP is one of the best plans to save tax and secure a promising future. It offers dual benefits to its investor. Firstly, the investors may avail of a life insurance policy under the premium they pay. Secondly, they also get an opportunity to make an investment of the remaining fund in the financial instrument of their choice. Under ULIP, the investor may avail of the tax benefit of up to INR 1.5 lakh under section 80C of the Income Tax Act 1961. In addition, the maturity returns that the policyholder earns will also be tax exempted under section 10 (10D) of the Income Tax Act. It is crucial to note that the premium charges must not exceed 10% of the sum assured in order to avail of the tax benefit. 

  2. National Saving Certificate

    National Saving Certificate is a government scheme that is considered to be a fixed income investment scheme. It offers the opportunity to small and middle-income investors to make the investment of their income and earn a satisfactory return. The scheme is as secure as a provident fund, and the investor is not bound to pay a handsome premium charge. However, they may consider paying charges based on their income and savings. In addition, the investor under section 80C may avail of the tax exemption of up to INR 1,50,000 from the taxable income. 

  3. Sukanya Samriddhi Yojana 

    The Sukanya Samriddhi Yojana (SSY) was launched by the Indian government in 2015 under the campaign 'Beti Bachao Beti Padhao.' The investor under this scheme may pay a fixed income, which will be invested in the appropriate market. The investor may earn a reasonable interest by making a fixed deposit at regular intervals. The investor qualifies to avail of the tax deduction under section 80 C of the Income Tax Act 1961. The SSY has a lock-in period of 21 years which allows the investor to withdraw the money after the maturity period of 21 years. Further, the benefits under the SSY can only be claimed by the girl child. 

  4. Interest in Home Loan

    An assessee may avail of the tax deduction under section 80EE for paying interest on the home loan. However, it is crucial to note that the assessee may only claim an amount up to INR 50,000 from the total taxable income. 

  5. Rent for Accommodation

    An individual living in a rented house may avail of the tax deduction benefits under section 80 GG of the income tax act 1961. It is provided that an individual who is self-employed and does not get a house rent allowance from anyone may claim the tax on the lowest amount of the three of the following:

    • INR 5,000 per month

    • 25 percent of the total income

    • Actual rent paid - 10 percent of the total income

  6. Repayment of an Education Loan

    An individual repaying the education loan may avail of the tax benefit under section 80 E of the Income Tax Act 1961. The debtor may claim the entire amount he pays the loan during the financial year. There is no maximum amount that exists that limits the criteria for tax exemption. Hence, he is entitled to avail himself of the 100 percent amount he pays to repay an education loan. 

  7. Equity Linked Savings Scheme (ELSS)

    ELLS is a mutual fund scheme in which a significant portion is invested in equity to generate a promising return. ELLS has a three-year lock-in period, the shortest period among other investment products. ELLS is considered one of the best tax saving schemes, which offers tax exemption of up to INR 1.5 lakh under section 80 C of the Income Tax Act 1961.

    Invest & Save upto ₹46,800 per annum in taxInvest & Save upto ₹46,800 per annum in tax
  8. Treatment of certain disease

    An individual may avail of tax benefits of up to INR 40,000 for the treatment of a specific disease. The tax deduction must be made under section 80 DDB of the Income Tax Act 1961. The particular condition for tax exemption could be AIDS, motor neuron disease, neurological disease, etc.

  9. National Pension Scheme (NPS)

    The NPS is considered the best tax saving scheme, allowing investors to build a significant corpus to meet future expenses. In addition, the taxpayer may avail of the tax deduction benefit under section 80 C for the maximum contribution of INR 15,000 made during a financial year.

  10. Interest on Saving Bank Account

    An individual may avail of the tax deduction benefit for interest received up to INR 10,000 under section 80 TTA of the Income Tax Act 1961.

  11. Health Insurance Premium

    A policyholder may avail of the tax deduction benefits if he pays the health insurance premium during a financial year. The tax benefits for health insurance premiums are available under section 80 D of the Income Tax Act 1961.

  12. Public Provident Fund

    An assessee is entitled to avail of the tax deduction benefits for the premium of PPF under section 80C of the Income Tax Act 1961.

  13. Senior Citizen Saving Scheme

    Under this scheme, the policyholder is entitled to claim tax deduction benefit under section 80C for the amount not exceeding INR 1.5 lakh.

  14. School Tuition Fee

    The Income Tax Act 1961 allows the assessee to claim a tax deduction for the tuition fee paid up to INR 1.5 lakh under section 80C.

  15. Donation 

    The tax deduction benefit can be claimed under section 80GG of the Income Tax Act 1961 for the donation made to a charitable institution.

Conclusion

The taxpayer is entitled to benefit from the aforementioned tax-saving schemes to save taxes and plan a promising future. In addition, government schemes are generally introduced to help the citizens by availing tax benefits and providing good returns.

FAQ's

  • Under which section an assessee may avail of the tax benefits for ULIP schemes?

    ULIP provides tax benefits under section 80 C over the premium paid by the policyholder. 
  • To what extent can I avail of tax deduction benefits under Sukanya Samriddhi Yojana?

    Tax benefits of up to INR 1.5 lakh can be availed under section 80 C.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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