Tax Saving Schemes

There are a number of tax savings schemes and each of them has its advantages and disadvantages. It needs proper homework to find out the best-suited scheme from a plethora of schemes available. An intelligent investor is one who considers the risk and liquidity factors too as important as the returns potential.

Fixed Deposits

Fixed deposits with scheduled banks for tenure of five years, if notified, are eligible for tax deduction. Though the interest receivable is taxable, this option is suitable for people with less risk appetite like retired persons, widows, etcetera.

National Savings Scheme

National Savings Certificates are secured instruments issued by the government. Since the tenure is rather longer, liquidity is not that easy.

Insurance Schemes

Life insurance policies help one to save tax to a certain extent. One should carefully assess the requirement regarding the insurance cover before signing in. Size of family, income, expenses etcetera are the factors to be assessed.

Public Provident Fund

Public Provident Fund or PPF is a fully secured scheme that offers eight per cent tax free returns. Though the tenure of the scheme is for fifteen years, withdrawals are allowed from the seventh year.

Equity Linked Savings Schemes

Equity Linked Savings Schemes or ELSS are provided by Mutual Funds. Since the lock-in period is limited to three years, liquidity is not a matter to worry. One can opt for dividend plan also. As the schemes are equity based, risk is part of them.