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Yes, tax free investment is a real thing and you can start with it today. Here are the best tax-free investment options in India.

Favourite Tax Saving Investments in India

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"Favourite Tax Saving Investments in India"

Sayan Das

From budgeting to expenses management and everything in between

<p>Paying hefty taxes can be mentally taxing. With tax-free investments, you secure your future as well as you reduce your tax liabilities.</p><p>But how to do all of that?&nbsp;<br>Here's a quick guide of all the tax-free investments.</p><h2><strong>Equity Linked Saving Scheme (ELSS)&nbsp;</strong></h2><p>Equity-Linked Saving Schemes (ELSS) are tax-saving equity mutual fund schemes with a three-year lock-in period. Investments in ELSS mutual funds up to ₹1.5 lakhs are exempt from income tax. They offer potential returns based on equity market performance, which can be volatile in the short term but tend to beat inflation in the long run. You can choose between dividend or growth payout options, with the latter being more tax-effective since dividends are now taxable.</p><p>As a beginner, you might need help understanding the stock market. But ELSS funds are managed, tracked and rebalanced by professionals known as fund managers, so you don’t have to worry about it.</p><h2><strong>National Pension Scheme (NPS)&nbsp;</strong></h2><p>The National Pension Scheme (NPS) is regulated by the PFRDA and designed for retirement planning. Indian citizens aged 18 to 60 can participate with low fund management charges.</p><p>NPS offers three asset profiles: Equity (E), Corporate bonds (C), and Government securities (G). The maximum equity investment is 75%. Contributions up to ₹1.5 lakh receive income tax exemption under section 80CCD (1B), with an additional ₹50,000 deduction. 40% of the redemption amount is tax-exempt at maturity, with mandatory annuity investment for monthly income.</p><p>NPS acts as a flexible, transparent, and safe tax saving investment tool, with a minimum investment of ₹500. It suits investors of all risk appetites.</p><h3><strong>Public Provident Fund (PPF)&nbsp;</strong></h3><p>PPF is a government-sponsored retirement scheme with tax exemptions. It benefits freelancers, contractors, and entrepreneurs without employer-provided pensions. The minimum investment is ₹500 annually, while the maximum is ₹1.5 lakh. You can invest monthly or as a lump sum. Failure to invest the minimum amount incurs penalties. Interest rates, currently 7.1%, are determined by the government and compounded annually.</p><p>PPF offers triple tax exemption on the principal, interest, and withdrawals and suits risk-averse investors with a long-term horizon.</p><h3><strong>National Savings Certificate (NSC)&nbsp;</strong></h3><p>NSC is a fixed-income tax-saving investment scheme available at post offices. It offers a safe investment backed by the Central Government. Investments up to ₹1.5 lakh in a financial year are tax-exempt. Interest is compounded annually and added to the principal. In the second year, you can claim a tax deduction on the new investment and previous year's interest. Maturity proceeds from NSC are taxable. It suits risk-averse investors with a medium-term horizon.</p><h3><strong>Bank Fixed Deposit (FD) Scheme&nbsp;</strong></h3><p>Investments in tax-saving bank fixed deposits with a tenure of five years are tax-exempt up to a maximum limit of ₹1.5 lakhs under section 80C of the Income Tax Act. The bank sets the interest rate on the fixed deposit scheme and may review and update the same every quarter. You may invest in the tax-saving fixed deposit as a one-time lump sum investment. Premature withdrawal is not allowed.</p><h2><strong>Invest in Mutual Funds with Fi&nbsp;</strong></h2><p>Your search for an amazing platform to invest in Mutual Funds ends here!&nbsp;<br>Not just ELSS but you can invest Debt, Cash, Hybrid funds, etc.&nbsp;<br>You can also invest in a wide range of direct <a target="_blank" rel="noopener noreferrer" href="https://fi.money/features/mutual-funds">Mutual Funds </a>on Fi with daily, weekly, or monthly SIPs. It's 100% flexible and comes with 0 penalties for missed payments.</p><p>So what are you waiting for?</p><p>Start your <a target="_blank" rel="noopener noreferrer" href="https://fi.money/features/mutual-funds">Mutual Funds </a>journey today!</p><h2><strong>Conclusion&nbsp;</strong></h2><p>In conclusion, tax-free investments offer a valuable opportunity to secure one's financial future while minimizing tax liabilities. Tax-saving options, such as ELSS, NPS, PPF, NSC, and Bank Fixed Deposit Scheme, cater to various risk appetites and investment horizons. By making informed choices and utilizing these tax-saving tools, individuals can alleviate the mental burden of paying hefty taxes and work towards building a more financially stable and secure future.</p><h2><strong>Invest Via Fi&nbsp;</strong></h2><p>Users can find several investment options on the Fi app. Be it short-term or long-term — it's easy to invest with a simple swipe of your phone's screen. If you want to save up for a short-term goal &amp; earn interest on it, select our super-flexible Smart Deposit. If you're looking for higher/stable returns, opt for a Fixed Deposit.</p><h2><strong>Frequently Asked Questions&nbsp;</strong></h2><h3><strong>1. How can I invest to avoid paying taxes?&nbsp;</strong></h3><p>You may invest in one of the tax-saving schemes to avoid paying taxes. These schemes provide income tax exemptions on investment amounts up to a specified limit per financial year.</p><h3><strong>2. What is a TFRA tax-free account?&nbsp;</strong></h3><p>A tax-free retirement account or TFRA is a type of long-term investment plan that’s designed to help minimise taxes on retirement income.</p><h3><strong>3. Which are the best tax saving investment options?&nbsp;</strong></h3><p>The amount invested in these schemes is exempted from income tax up to a specified limit per financial year: Life Insurance, PPF, NPS, Pension, Deposits and SCSS (Senior Citizens Saving Schemes).</p>