In the maze of taxation and financial planning, the Income Tax Act generously extends numerous deductions to smart investors. One can significantly reduce taxable income through careful planning and investment in specified avenues.

Here are the top ten investment tips that not only promise attractive returns but also offer substantial tax savings:

Public Provident Fund (PPF): A highly secure investment, PPF comes with a lock-in period of 15 years and is offering a return of approximately 7.1% currently. The long tenure ensures compounded, tax-free returns.

National Savings Certificate (NSC): NSC is a 5-year fixed income investment scheme with a return of 6.8%. It’s a safe option for those looking at medium-term investment.

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Unit Linked Insurance Plan (ULIP): ULIP or UTI has a 5-year lock-in period. The returns vary based on the investor’s chosen plan. Apart from investment returns, it provides insurance coverage as well.

Equity Linked Savings Scheme (ELSS): With the shortest lock-in period of 3 years among tax-saving options, ELSS funds offer expected returns between 12% and 15%. They invest in the equity market, making them suitable for investors with a higher risk appetite.

National Pension System (NPS): A retirement savings plan, NPS remains locked in until retirement. It provides expected returns between 8% and 10% and offers multiple fund options based on risk preference.

Fixed Deposit or Post Office Deposits: These 5-year deposits promise returns between 7% and 9%. They’re best for investors looking for guaranteed returns with zero risks.

Sukanya Samriddhi Scheme: A special scheme for the girl child. Deductions are permitted for two girl children, with a maturity age of 21. Withdrawals are allowed after 18 for education or marriage. The minimum annual investment starts from Rs. 250, with interest earnings up to 7.6%.

LIC Life Insurance Investment: Life Insurance Corporation (LIC) premiums for self, spouse, or any child of the individual qualify for deductions. This dual-benefit option provides both insurance coverage and tax benefits.

9-Year Term Deposits under Post Office: Governed by the Post Office Time Deposit Rules, 1981, these deposits are another safe and reliable option for investors.

One can get a total deduction of up to Rs150000 under Section 80C of Income Tax Act 1961 for investing in the above avenues. Moreover, an additional deduction of Rs 50000 is available for contribution made to the pension scheme of the central government under Section 80CCD.

Residential House Property Investment: Beyond the typical investments, purchasing a residential property through a loan is a smart choice. Sections 24b and 80EEA offer deductions on the interest paid. However, certain conditions apply, including the loan sanction period and the property’s value.

In conclusion, effective tax planning is not just about saving tax but also about investing wisely to reap the best possible returns. It’s always recommended to consult with financial experts to tailor investments based on individual needs and risk appetite.

(By Swetha Kochar, Partner, PKC Management Consulting)

Disclaimer: This is the author’s personal opinion. Readers are advised to consult their financial planner before making any investment.