Risks and Returns of Tax Saving Investments
Before investing, decide whether you prefer low risk/low return or high risk/high return products. If market ups and downs stress you, stick to safer options.
Low-Risk Options
Fixed Deposits (FDs) – Safe, guaranteed returns—choose banks with high credit ratings (AAA/FAAA). – Interest is paid monthly, quarterly, annually, or compounded on maturity for the highest return.
Public Provident Fund (PPF) – Government-backed savings with 7.1% interest. – Opens at post offices or public banks, available online too. – Ideal for long-term savings and tax benefits.
Endowment Life Insurance – Combines insurance plus savings. – Pays out on maturity or death. – Easily compared online for best plans.
High-Risk Options
Direct Equities (Stocks) – Requires research, time, and expertise. – Best for investors who can track markets and company performance.
Equity Funds – Managed by professionals. – Great for long-term equity exposure without needing expert knowledge.
Unit-Linked Insurance Plans (ULIPs) – Insurance with market-linked investments. – Multiple fund options based on your risk appetite.
Mixed & Other Tax-Saving Options
- Post Office Schemes: NSC, POMIS, POTD, KVP—government-backed, varied tenures and rates.
- Bonds: Work like FDs. Check credit ratings, interest, and compounding terms. Infrastructure bonds may also offer tax savings.
- Bond Funds: Pooled securities (government/corporate bonds). More flexible and liquid than individual bonds.
- Sukanya Samriddhi Account: For girls under 10. Deposit ₹1,000–₹1.5 lakh per year. Used for education and marriage needs.
- Tax-Saving FDs: 5-year lock-in fixed deposits in banks. Investment earns taxable interest but qualifies under Section 80C.
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