Tax season for the financial year 2015-2016 has arrived and many of us must have started getting E-mails from the HR team to provide investment proofs in order to save tax. And along with this starts telephone calls, SMS, E-mails from insurance companies, insurance agents and others to invest and save tax. And as the final date nears, there is always a chance that tax payer might fall into the trap of either agent or choose a product with a sole purpose of saving tax without taking into consideration the long term financial goal.
So here are the recommended zero risk investment products which you can still invest in, save tax and get good returns. All the below listed investments are qualify for deduction under section 80C of Indian income tax act and maximum investment limit is Rs. 1, 50, 000 annually:
- Public Provident Fund: This is the most recommended investment product in every tax payers portfolio. In fact, if you ask your parents or any senior citizen, PPF is the word you will hear from them. It is the mother of all investment products. The interest rate is declared every year but is normally in the range of 8%-9%. You can open PPF account either at post-office and state run banks. SBI is one such bank. Few banks also offer online PF account opening facility but application form and KYC can be done by visiting the bank physically. Interest earned and investment made are fully exempt from tax.
- Sukanya Samriddhi Account: This actually is a new product and is only for parents with girl child aged less than 10 years. But if the girl is born between December 2013-December 2014, then the account can be still opened under her name. Minimum amount that can be deposited is Rs. 1000 and maximum Rs. 1, 50, 000 and is deductible under section 80C. Compared to PPF, Sukanya Samriddhi has become a favorite amongst zero risk investors as the returns are very good. For e.g. investing Rs. 50, 000 every year will earn Rs. 2, 668, 821 on maturity.
- Life Insurance Policies: Depending on the type of product selected, investing in life insurance products not only secures your family’s financial future but also qualifies for deductions under section 80C. The product which is investment cum insurance covering life as well, offers guaranteed returns on maturity is called endowment policy. Then there is term life insurance which purely covers your life for pre-defined period and offers no return when the policy expires. Other variant is whole life insurance, covering your whole life as long as the policy is active. You can buy life insurance policy online which are less expensive as it does not involve agent’s commission when bought offline. Moreover, when buying online you get ample of choice to compare multiple products from various companies which is not possule when bough through agents.
- National Savings Certificate: NSC too saves tax and is a small saving product offering returns in a modest range of 8.5%-8.8%. There is a lock-in period of 5 years or 10 years but the returns are fully exempt from tax. Moreover interest rates are calculated half yearly. Since NSC is issued by Indian government, it falls into the category of safest investment product.
- Tax Saving Fixed Deposit: These are offered by almost every Indian public and private sector banks with a period of 5 years. You have to invest a fixed amount once and it gets locked for 5 years and interest earned in taxable. Next year if you want to invest again, then a new FD has to be purchased. Interest rate varies for each bank.
Post Office Savings Scheme: Apart from PPF, NSC offered by post office, other scheme which offers good return and qualify for deduction under section 80C is post office savings account. But compared to above listed products the returns are very low which is just 4% per annum. Moreover the interest earned is tax free upto Rs. 10, 000 per year.