Tax planning is extremely important and the best time to start planning your tax-saving investments is at the beginning of the financial year. Most taxpayers procrastinate till the last quarter of the year, resulting in hurried decisions. Instead, if you plan at the start of the year, your investments can compound and help you achieve long-term goals. The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act.

Section 80C includes various investments and expenses you can claim deductions on – up to the limit of Rs. 1.5 lakh in a financial year. Under various provisions of the Income-tax Act, though, there are other deductions possible that can help a taxpayer reduce their tax liability significantly. For deposits made in PPF, EPF, LIC premium, Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS), ULIP, tax-saving FDs, stamp duty and property purchase registration fees, etc, a taxpayer can avail tax exemption under section 80C. 

Here are 5 tax saving investment options that offer guaranteed returns of up to 7.6%:

1. 5-year Tax Saving FD: For risk-averse investors, bank fixed deposits are the preferred tax-saving investment option. Tax-saving FDs come with a lock-in period of 5 years. Currently, on 5-year tax-saving bank FDs, SBI is giving an interest rate of 5.4 per cent to general individuals and 6.2 per cent to senior citizens. According to Section 80TTB, senior citizens can claim a deduction of Rs 50,000 on the interest received from deposits. Remember that both investment and maturity amount are tax-free in case of tax-saving FDs. However, interest is taxable. Only if the fixed deposit returns surpass Rs 40,000 (Rs 50,000 for senior citizens) in a year, TDS is deducted by the bank. TDS on the FD income withheld by the bank is 10 per cent if you support the bank with your PAN specifics.

2. National Savings Certificate (NSC): NSCs are another very common tax-saving investment option among risk-averse investors. For a term of five years, NSC provides guaranteed interest. Currently, NSC interest rate is 6.8 per cent which is compounded annually but is paid at maturity. Interest earned from 5-year NSC is taxable at the time of maturity. Remember that under Section 80C, the interest amount that is reinvested is eligible for a tax deduction, making it tax-free. One can make a deposit in this small saving scheme by a minimum of Rs 1,000 and in multiples of Rs 100 with no upper limit. 

3. Senior Citizen Savings Scheme (SCSS): SCSS is one of the most popular tax-saving investment scheme for senior citizens in the country. Currently, SCSS is providing a guaranteed return of 7.4% (payable quarterly). This scheme comes with a tenure of five years. Within one year of maturity, the SCSS account can be further extended for a block of 3 years. One can deposit in multiples of Rs 1,000 up to a limit of Rs 15 lakhs. After completion of one year, premature withdrawal is allowed after paying a penalty. Interest earned on SCSS deposit is taxable if it reaches Rs 50,000 in a financial year and TDS is calculated accordingly as well. Under section 80C of the Income Tax Act, deposits made towards SCSS qualify for tax deductions. 

4. Sukanya Samriddhi Yojana (SSY): Sukanya Samriddhi Yojana is one of the most popular long-term investment instruments. The normal age-limit for the opening of the SSY account is up to 10 years from the date of birth of the child. Also, she must be a resident of India. The child will become the account holder when she reaches 18 years. One can invest a minimum of Rs. 250 and a maximum of Rs 1.5 lakh in one financial year. Earlier, the minimum contribution was Rs. 1000. However, the government reduced it to Rs. 250 in 2018. Also, the interest accrued and maturity amount is exempted from taxes. Sukanya Samriddhi Scheme now fetches 7.6% interest. Investments under SSY come under EEE status, which means that at the time of deposit, accrual of interest and withdrawal, an investor receives a tax deduction. 

5. Public Provident Fund (PPF): PPF is one popular long-term investment avenue that gets the exempt-exempt-exempt tax status. It offers a high-interest rate and is loaded with tax benefits. Also, the interest rate offered on PPF is higher than other fixed investments products of similar tenure. The interest earned as well as the returns are not taxable under the Income Tax. The investments here can be made in a lump sum or in a maximum of 12 installments. The minimum investment allowed is Rs. 500 and the maximum is 1.5 lakh for each financial year. The current interest rate is 7.1% p.a and the tenure of the PPF account is 15 years.