High Yielding Tax Saving Schemes

In the previous post, we discussed in length about how you can save more by planning your tax meticulously under Section 80C of The Income-tax Act, 1961 (the “IT Act”). Now that you are aware of several investment options that will give you the benefit of tax savings, undoubtedly you would be looking for high yielding tax saving schemes to invest your yearly bonus wisely.


Today, we will discuss few investment options that not only provide tax savings but also high returns on your investment. Of course, the final choice depends on many factors including your risk appetite, but one of these options or a mix of few will surely fit the bill.

ELSS – ELSS or Equity Linked Saving Schemes are a top choice for investors owing to high returns, shortest lock-in period of 3 years under Section 80C of the IT Act and ease of investment as transactions can be carried out online once your KYC is complete.

However, investors must keep in mind that ELSS returns are equity linked and market risk is inevitable. Investing in equity has been known to give better returns over a long-term horizon of at least 10 years.

Tip: Apart from investing a lump sum, you can also start a monthly SIP to build your wealth consistently over time.

PPF – PPF or Public Provident Fund is the favourite of conservative investors who do not want to take on market risk. While the interest rate on PPF has been brought down this financial year, it still remains a popular option due to assured returns for investors. While PPF does not provide returns as high as investing in equity, a percentage of your savings may be invested in PPF for mitigating the overall risk of the portfolio.

 Putting extra in your VPF or Voluntary Provident Fund is also a good idea for building your wealth. When you receive your pay hike this month, allocate 20% of the hike to your monthly VPF contribution and build your corpus without feeling the pinch.

NPS – The National Pension Scheme makes it to the list because of the additional tax deduction of INR 50,000 allowed under this scheme. A subscriber simply has to open an NPS account (and get PRAN or Permanent Retirement Account Number) wherein the contributions made in the account are invested in pension funds by experienced fund managers. The system is highly transparent and you can track your investments on a regular basis.

At the age of 60, one can withdraw 60% of the investments and the remaining 40% has to be used to purchase annuity. Only 40% of the withdrawn amount is tax-free and the remaining is taxed at normal rate. Further, while the amount used to purchase annuity is not taxed, annuity payments are taxable.

Apart from these 3 options, investing in ULIPs (Unit Linked Insurance Plans) is also becoming popular. Understandably, it is easy to be confused with so many investment options in the market. Make the right choice by seeking the advice of Dr. Celso, India’s well-known financial advisor and author of the book, Who says money doesn’t grow on trees? Book an appointment now and start your journey towards wealth creation.


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