As a taxpayer, it is important for us to look for several investment options that not only help in saving tax but also help in generating tax-free income. There are many deductions available under section 80C of the Income Tax Act, therefore, we need to plan and invest in advance in order to claim the deduction for a particular financial year.

Tax and investment experts suggest various investment plans that can help an investor to save money outgo at the time of filing an ITR. However, one is required to understand the existing norms of the investment plans so that he/she gets higher returns and tax benefits.

Mentioned below are the top investment options that can help you get higher returns and save income tax:

Life insurance policy with money back offer Under Section 80C of the Income Tax Act, the premium that you pay for your LIC policy with money back offer is free from tax. In this category, both ULIP (Unit Linked Investment Plan) and traditional life insurance policy holders can avail tax benefit under Section 80C. However, to avail tax benefits your annual premium must not exceed 10% of the sum assured and you must have paid two years premium of the LIC policy with money back offer.

Sukanya Samriddhi Yojana This yojana is considered as one of the most suitable investment options that offers EEE benefits to the investor. It is a small savings scheme for the girl child under 'Beti Bachao Beti Padhao' campaign. In this scheme, the investor can avail income tax benefits on the investment, interest earned and the maturity amount. The interest offered under this scheme is 8.5% to the investor. The investor can open a Sukanya Samriddhi Account in the name of his or her girl child, if she is below the age of 10 years. Further, investments can be made in this account up to 14 years of the girl child’s age and can withdraw 50 percent of the maturity amount after the girl is 18 years of age. The investment amount in this yojana matures after the girl child becomes 21 years of age.
Public Provident Fund (PPF)Public Provident Fund is one of the best investment options that offers income tax benefit on investment up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Also, the interest that one earns through PPF is free from tax and the amount that is received on maturity is tax free too. Currently, this scheme is offering an interest rate of 7.9 percent annually. With a lock-in period of 15 years, this investment scheme also falls under EEE category.

ELSS mutual funds Investments made under ELSS (Equity Linked Savings Scheme) mutual funds are free from tax. According to financial experts, ELSS mutual fund is an equity mutual fund, which is a good long-term investment option. Also, it gives at least 12 per cent return to an investor.

EPF (Employees' Provident Fund)EPF is the main scheme under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. It is backed by the Employees' Provident Fund Organisation (EPFO). Under Section 80C of the Income Tax Act 1961, the investment made under EPF of up to Rs 1.5 lakh is free from income tax. In EPF, the rate of interest is calculated on the basis of monthly running balance. In addition to this, if an employee withdraws the PF amount after five years of his/her job, no tax shall be deducted.

Tax saving FDs Bank fixed deposits are also known as tax saving FDs. with a lock-in period of 5 years, the investments made in these FDs are exempted from income tax under section 80C of the Income Tax Act. However, the interest earned through these fixed deposits is not free from income tax.
Post office savings Just like bank fixed deposits, post office fixed deposits are also exempted from income tax. These deposits also have a tenure of up to 5 years. A minimum of Rs 200 is required as the investment amount and thereafter in multiples of Rs 200. Besides, the interest income earned through these deposits are liable to be taxed.

Home loan interest rate payment: Under Section 24B of the Income Tax Act, the interest that you pay on a home loan, home renovation and repair loans are free from tax. This benefit on income tax is applicable on both residential and commercial property. Furthermore, both loan pre-payment and processing fee fall under the interest category and all payments under these heads are tax free.

Education loan: if you have availed an education loan then the payment for the 8 years from the year of education loan repayment is free from income tax.

Child’s tuition feeUnder Section 80C of the Income Tax Act 1961, tax exemption is allowed on tuition fee paid for two children. The tuition fee includes both school and college. Also, this income tax rebate is available on full-time education.

Here are some of the most common questions asked about income tax savings investments: