At the time of e filing income tax, everyone wants to save taxes. When you make investment in a tax-saving vehicle, it’s crucial to watch out the taxability criterion of its income. In case the earned income falls in the tax bracket, building wealth over a long time gets restricted as taxes will lower down the earned returns.

Mentioned below are 4 tax saving instruments that will help you to save tax when you efile tax returns. Also, it helps you earn tax-free income.

1.Equity-Linked Save Schemes

Equity-linked savings schemes is a diversified investment option that comes with two stand out features. First, money invested in ELSS qualifies for tax deductions up to a limit of Rs. 1.5 lakh in a year as per Section 80C of IT Act, 1961. Secondly, the invested money comes with a lock-in period of three years.
ELSS is offered by every mutual fund corporation. The returns earned by ELSS are not pre-defined and depends entirely on the equity markets performance.

What makes Equity-Linked Savings Schemes


In ELSS, 65 percent of funds are allocated to equities. At the time of e filing income tax, you can avail tax benefits on the dividends earned in an ELSS. Making an investment in ELSS earns tax-free income for the growth unitholders as well as the dividend holders.

2.Public Provident Fund

Public Provident Fund Scheme has been a sought-after savings instrument for investors since decades. The principal amount that earns interest guarantees that the earned returns are tax-free.

Currently, PPF offers 7.9 percent interest per annum. The interest rates change every quarter. If someone is paying 30.9 percent tax, it transforms to approx 11.43 percent tax return.

Public Provident Fund Scheme is a 15-year plan that can be extended if required. One can open a PPF account in a post office or bank branch that offers this facility. Also, one can open a PPF account online as a few banks offer this facility.

PPF is Ideal for

PPF is ideal for the investors who don’t want to experience volatility in their returns. For long-term goals specifically, when the inflation-adjusted target amount is high, it’s beneficial to have some equity exposure.

3. Employees’ Provident Fund

Employees’ Provident Fund is an investment option that is beneficial for a salaried individual. It helps to save tax when you efile tax returns. A salaried employee contributes 12% of his/her basic salary every month (as a compulsion) towards his/her Employees’ Provident Fund account. An equal share is contributed by his/her employer but only 3.67% goes into Employees’ Provident Fund account.

An employee’s contributions towards EPF are eligible for tax deductions as per Section 80C of IT Act, 1961, up to Rs. 1.5 Lakh every year. The employer’s contribution isn’t eligible for the tax redemption.

4. Unit Linked Insurance Plan

Unit-linked insurance plan is an investment instrument that offers a perfect blend of protection and saving. It provides life insurance and helps to channelize one’s savings into a variety of market-linked assets so that one’s long-term goals are accomplished.
Generally, ULIPs offers 5 -9 fund selections that maintain asset allocation between debt and equity. A ULIP comes with a time period of 15 and 20 years or more. Its lock-in period is freeze for 5 years. The value of funds at the time of exiting the policy (5 years) or at the time maturity is tax-free. At the time of e filing income tax, you can declare your investment in ULIP and avail tax benefits.

The preference of an investment option totally depends on the investor and his investment portfolio. One investment might not suit everybody. Before you efile tax returns; check where you can save taxes.


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