Best Tax Saving Investments For 2025

Looking for best tax saving investments? Don’t know how to save income tax? Tax saving can be easy if done in a correct manner. There are various smart ways to stay away from paying Taxes and save as much as possible. Generally, people indulge into Tax Planning when the financial year is about to end. But, does this ensure prudent investment planning? No! Investing in the early quarters of the financial year is a smarter approach instead. This ensures that you get time to plan your investment and avail the most out of it. Some of the tax saving investments include tax saving Mutual Funds ELSS, PPF, tax saving FD, NPS etc. a detailed list of tax saving investment options is mentioned below.

Some of the Best Investment Plan in India that are beneficial for tax saving include-

Tax Saving ELSS Funds Or Equity Linked Savings Schemes

Tax saving is an ideal way of financial planning. ELSS Funds are tax saving schemes that are equity diversified and invest the major part of the fund corpus either in equities or equity-related instruments. Being Market-linked, equity-linked savings scheme or ELSS funds offer good returns. ELSS funds are tax saving Mutual Funds that offers tax deductions upto INR 1,50,000 under Section 80C of Income Tax Act.

As per the Budget 2018, ELSS would attract Long Term Capital Gains (LTCG). Investors would be taxed at 10% (with no indexation) under long term Capital Gain tax. Gains up to INR 1 lakh are free of tax. Tax at 10% applies to gains above INR 1 lakh.

Top 3 Tax Saving ELSS Funds 2025

Other Popular Tax Saving Schemes in India

PPF Or Public Provident Fund

PPF or Public Provident Fund is a tax-free investment option that is backed by the Central Government of India. PPF came into existence in 1968 by the Ministry of Finance. Public Provident Fund aims to provide financial security to people post-retirement. The government of India launched PPF in order to help people inculcate the habit of saving and also plan their retirement well in advance. PPF is one of the best tax saving investments as the interest earned on deposits are not taxable. Moreover, the investments are liable for tax deductions under section 80C of Income Tax Act.

Tax Saving FD Or Fixed Deposit

tax saving FD or Fixed Deposits are financial instruments that are provided by banks for a fixed period of time. The interest rate of FD varies from 4% to 8% (according to the investment tenure). Usually, it is seen that higher the period of investment higher is the rate of interest on FD and vice versa. Though FD is a tax saving and safe investment, the interest earned on them is fully taxable as per the Income Tax Act. Furthermore, if the rate of interest on FD is above INR 10,000, banks deduct a TDS @ 10% p.a.

NPS Or National Pension Scheme

NPS or National Pension Scheme is a tax saving investment option formulated by the Central Government of India to help people save tax while saving for retirement. As per the National Pension Scheme, one can open a personal retirement account where they can save a pension corpus during their working life. Apart from Retirement planning, investments upto 50,000 under NPS are liable for deductions under section 80 CCD (1B). Under section 80C of Income Tax Act, tax deductions upto 1,50,000 are liable on investments in a National Pension Scheme. This makes NPS one of the best tax saving investments in India.

National Saving Certificate (NSC)

National Saving Certificate (NSC) is a good Tax Saving Scheme to invest in. NSC interest rates are set in the month of April every year. The current interest rate of NSC is 7.9% p.a. Investments up to INR 1,00,000 per year are eligible for IT rebate under the Section 80C of the Income Tax Act. You can invest in NSC through your local Post Office as well.

Employee Provident Fund (EPF)

Employee Provident Fund or EPF is typically deducted from the salary of an individual which includes 12% of their basic salary. The employer also contributes the similar percentage of which 3.7% goes to the EPF and the remaining 8.3% goes towards the pension fund. It is a defined benefit scheme with interest rates being set every year. The interest rate was 8.8% p.a. for the year 2015-2016. There is no tax at the time of making the investment in EPF. Also, the interest earned is also tax-free. At the time of retirement, individuals can withdraw the entire amount in the account.

ULIP Or Unit Linked Insurance Policy

Unit-linked insurance Policy is an insurance policy that works an insurance cover along with Offering market linked returns. Under a ULIP, some part of your investment is invested in Mutual Funds (Equity, Balanced or Debt fund) and the remaining is contributed towards your life cover. One can save tax by investing in ULIP under Sections 80C, 80CCC and 80D of the Income Tax Act. Moreover, the interests that are earned on your ULIP investment are tax-free. Also, under section 10 (10D), tax-free maturity benefits are available as well. When choosing an investment, people usually tend to choose it just to avail tax benefits. Ideally, the investors should look for certain factors before investing. Some of those include maximum tax saving, low-cost investment, substantial returns etc. So, understand the tax saving investments well and then invest.