Tax Saving Investments with Tax Exempt Returns

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Tax Saving Investment Options

There are some investment options that have the double benefit of acting as a tax saving instrument and is also exempted from taxation.

Let’s learn why it is important to invest in tax exempted investment plans:

The Indian government, much like every other government in the world, charges its countrymen and citizen with taxes depending on how much income they earn. Depending on the amount of income earned, each has a certain amount of tax that they have to pay to the government. This rate is different for each separate individual.  The higher the income generated by a person, higher is the rate of tax charged, and more tax needs to be paid. Similarly, is a taxpayer has a lower amount of yearly income, and then he or she has to pay fewer taxes. There is a minimum amount of yearly income required by a citizen to be eligible to pay taxes. If the income of an individual is below this minimum value, then he or she is expected from paying taxes. Seeing that we live in a capitalistic society where making as much money as possible is the prime focus, the majority of the people are bound to pay taxes.
There are many finance products and plans that are used by individuals and business men to go about their commercial and monetary tasks. These products and plans which are paid for have taxes included in them also. Taxes are incorporated in the country’s economic flow to keep the financial strength of the country alive and help the government use the funds to bring betterment and the necessary changes in society to improve the quality of life.

The truth is that nobody likes to pay taxes. It is simply by many as an extra burden to their hard earned money. People are always searching for ways to save up ion tax payments and find avenues that do not need extra payment in the name of tax and are tax exempted. The Income Tax Act of 1961 has numerous clauses and statement that allows tax exemption on many such notions. The Income Tax Act allows the people of India to enjoy tax saving benefits on plans and products offered by the government for financial settlement and business. Banks and insurance companies and investment agencies are some of the many sectors of the financial market that has multiple products and plans that offer tax exemption as an additional benefit. In this article, we will focus mostly on the investment market as a tax saving instrument which give a double benefit by adding tax exemption with tax saving options.

Tax saving and investments

Investments are one of the most prefer wealth generating instruments of society. Even though it comes with its risks of its own, by carefully planning out the right time and condition of the investment market, one can apply simple and common knowledge in investment plans and over some time, build on and generate wealth for personal and professional use. Owing to the Income Tax Act, 1961, there are quite a few investments that offer people the benefits and advantage of having up on tax. Other investments plans are characterized by the fact that they are completely tax-free. Meaning that the individual who has invested in that particular investment is not liable to pay any form of tax on the returns.

Lets talk about 6 tax saving investments with tax exempted return benefit

1.ULIPs or United-Linked Insurance Plans

A united- linked insurance plan or ULIP is a unique product that is offered insurance companies. Unlike other investment plans and products, ULIPs are a type hybrid investment plan. It is hybrid in the sense that it provides the investors with the benefit of both insurance and investment together and executes both under one single integrated plan. The assets that are incorporated in this plan are distributed among debt and equity. ULIP as a tax saving instrument that helps the investor acquire benefits from the money which has been put into different markets and linked assets all the while providing the advantage of risk cover.

A ULIP generally has a time span of about 15 to 20 years. This time period can e extended by 5 years at a time after completion of the initial maturity period. During this time, the money cannot be withdrawn as it is locked-in. Only after the passage of this time can investors finally exit from this scheme. Until its completion, the investor must be committed to this kind of tax saving instrument.  After the initial 12 to 20 years, the investor wishes to extend the maturity period then he can do so in increments of 5 years at a time.


People who wish to save tax by investing in ULIPs should do so only if they have long-term goals in mind. As a short-term investment product, ULIPs do not function well as even after the initial 15 to 20 years are complete, the extra time that is allotted for lock-in is a minimum of 5 years. Investors should plan out there future expectancy and then go for ULIPs.

2.Public Provident Fund or PPF

A PPF or public provident fund is another tax saving instrument in the investment market in which investors like to indulge in and make the most out of. A public provident is one of the oldest standing tax-saving instrument and is also by far one of the popular ones amongst investors. This particular investment product allows investors to gain sovereign guarantee as well as gain returns that are exempted from taxation. This benefit is brought forward by the Income Tax Act of 1961 under Section 80 which states clearly that the principal invested in PPF is qualified to be liable to tax deductions.


A PPF scheme, much like a ULIP, has a time duration of 15 years which can be again extended as many times as the investor wishes in increments of 5 years. Public provident funds can be opened from any branch of banks or even in designated post offices. Some banks also have the option to open a PPF account through online mediums. In public provident funds, an investor can deposit money a total of 12 times. Investors should always remember to make sure that when he or she is depositing money for a month; it should be done before the 5th of that respective month. Depositing the money before 5th will allow the investor to gain interest for the entirety of the month and thus get more returns at the end of the term. Having tax exemption benefits, doing this will allows investors to reap the maximum advantage from PPF and gain a lump sum amount of returns at the end of the public provident fund.


What makes this scheme so popular and a favorite of investors is that during the 15 years of investments, there are clauses and provision in a PPF that allows an investor to make partial withdrawals and even take out loans on the principal amount.

3.Equity-linked saving scheme or ELSS

ELSS or equity-linked saving schemes is another tax saving instrument which allows people to save up on taxes while being exempted from taxes on the scheme itself. These investment schemes are a type of close-ended investment products with lock-in periods of 3 years. The taxes benefits that are offered by ELSS are under Section 80 C of the Income Tax Act, 1961.equity linked saving schemes are considered one of the best tax saving instruments. This is due to the fact that the lock-in period is of 3 years which is significantly less than other investment and wealth maturity schemes and has better liquidity prospects as compared to public provident funds and NSCs. The tax benefits that are associated with ELSS are applicable for a total sum of 1.5 lakh each year. Is the amount crosses this threshold then the investor no longer enjoys the benefit f tax exemption, and the amount is refunded to the investor without any interest?

4.Insurance schemes

In the life insurance market, there are a lot of different schemes, products, and policies which help cater to the needs and financial goals of different people. Companies and firms have a range of different products which help them provide the utmost customer satisfaction possible. Schemes and plans like money back policies, endowment, and whole life insurance plans are traditional schemes that are taken up by many potential clients that are looking for insurance policies that fit and compliment their financial goals whether be it for long term or short term. These insurance schemes are all tax-free and act as tax saving instruments in the hand of an investor under Section 80 C of the IT Act. Even though these traditional insurance schemes and plans produce comparatively low returns, they are the go-to policies for all investors especially those who are new to the insurance market and are beginners in insurance investment. Investors can see which insurance scheme is perfect for their goals and wishes for the future and accordingly apply for them. These insurance schemes are highly beneficial for the amateurs and beginners in investment as this allows them to gain experience in investment avenues’ and help preps are for business ventures in the near or distant future that require heavy financial aid.

5.Sukanya Samriddhi

India has been a country where misogyny has been prevalent throughout its history. Until recent times of rational thought and progressive outlook have girls been given the rightful justice and the equal opportunity to stand in society. In light of the unfair history and prejudice against girl infants, the Indian government has a scheme that helps benefit those who have a girl child in their homes and wish to secure her future. Owing to this, the Sukanya Samriddhi account takes its place as another one of the best tax exempted investment plans there is in India. This particular investment scheme provides the investor with a staggering interest rate of 8.1 % which puts shame to most of the other investment schemes with fixed rates of interest. Amounts to a maximum of 1.5 lakh are eligible to qualify for tax exemption under Section 80 C of the Income Tax Act. Also, this particular investment avenue offers its investor with tax-free income from interest. The combined benefits of all these advantages offered by this investment plan make it one of the best investment schemes in the country which can be taken up by the investor to ensure a secure future with financial stability and monetary strength for his or her girl child.

These are some of the many investment schemes that offer the investor with double benefit on tax saving. Those who wish to makes secure investment which will help them generate and increase wealth all the while saving up on taxes and earning tax free interest income; they can indulge and participate in these investment schemes and others of their kind. There are many companies and firms that offer a wide array of such investment options from which investors can choose from as per their liking. Choosing such double benefit investment schemes which are in accordance and have good compatibility with the investor’s long term and short term goals accordingly can help the investor save up a lot on taxes and at the same time manage to generate a lump sum amount of wealth over a period of time.


Thanks to the Section 80 C of the Income Tax Act, many such investment plans are liable to tax saving interest income and tax exemption benefits as well. With the help in the investment plans and there double tax benefit characteristic, anyone who wishes can save up a lot on taxes and at the same time build up their financial portfolio. Investing in such policies and schemes are easy and simple, and with the right mentality and commitment, it can prove to be extremely fruitful to any and all investors.