If you are planning your investment strategies or trying to save taxes, the most significant question is whether there are any tax-saving schemes in India. 

Planning and investing in taxes are essential, but tax-saving strategies are equally important. So, let’s look at some of the best tax-saving schemes in India. 

Tax Saving Schemes in India - Table of Contents

How to Plan Your Tax-Saving Investments For the year?

Every year April 1st is the beginning of tax saving for salaried and non-salaried people. The purpose of having an excellent tax-saving investment should not only help gain tax exemptions but also earn a tax-free income. 

But rather than waiting for the financial year to end and opting for ad-hoc tax saving options, it is intelligent to begin investing in the early months to plan your investments properly while getting maximum returns. Factors such as funds, liquidity, and the size of the returns are some aspects you should consider while zeroing in on the best tax-saving investment strategy. 

Tax-saving investment options fall under Section 80C of the Income Tax Act. This makes the taxpayer eligible for exemptions up to Rs.1,50,000. Investors can choose from Equity Linked Saving Schemes, Life Insurance, Public Provident Funds, Bonds, National Savings Schemes, and Fixed Deposits.

Most people forget that tax saving is a significant aspect of financial planning. A good tax-saving strategy can help solve the duality of helping people reach their financial goals and save some tax as well. 

A list of the best tax saving schemes in India are:

15 Best Tax Saving Schemes in India in 2023

Scheme #1: ELSS Mutual Funds

Equity Linked Savings Schemes are mutual funds that invest a significant portion of a portfolio and have a three-year mandatory locked-in period. This is considered to be one of the shortest and best tax savings schemes in India. Investing in these funds is tax-deductible up to Rs. 1.5 lakhs under section 80C of the Income Tax Act. 

Scheme #2: Unit Linked Insurance Plan

The ULIP Insurance Plan is the most critical tax-saving scheme in India. It ensures that the person’s family is financially secure in case of their death. When purchasing a life insurance policy, the investor can avail of some benefits. 

Scheme #3: National Savings Certificate

This is a government of India initiative, where a national savings certificate aims at small and middle-income families to earn better rewards.    

Scheme #4: Sukanya Samridhi Yojana (SSY)

Another vital tax saving scheme is Sukanya Samriddhi Yojana. The scheme provides fixed-income investment plans in which the taxpayer makes regular deposits and earns interest. 

Scheme #5: Public Provident Fund (PPF)

The PPF option is one of the most popular tax-saving schemes among people. One of the main reasons is that this falls under the exempt tax status. The account comes with a 15-year lock-in period and allows investors the option to withdraw from the account. 

Scheme #6: Senior Citizen Savings Scheme

The senior citizen savings option allows for investments through post offices and banks, offering the highest rates in any savings scheme. 

Scheme #7: Tax-saving FD

Tax-saver FDs are one of the safest tax-saving options. They are much safer than equity investments. Investments in FD schemes are eligible for deductions under section 80C, and with a minimum period of 5 years lock-in, it helps save taxes. 

Scheme #8: National Pension Scheme (NPS)

The NPS is another good tax saving scheme that offers you the option to build an option for your future with a regular income. A Tier-1 account has a lock-in period as the subscriber has to reach 60 years. The maximum contribution in this section is Rs. 15,000 pa and is tax deductible under section 80C of the Income Tax Act. 

Scheme #9: Savings Bank Account Interest

A savings or current account is the primary account where you can keep your money safe. This scheme offers deductions under Section 80TTA up to Rs. 10000. This amounts to the total interest earned. 

Scheme #10: Health Insurance Premiums Under Section 80D

Medical insurance is one of the safest and best tax-saving options. This provides taxpayers the option to get benefits from two sides: 

• An insurance policy that helps during medical emergencies. 
• Tax benefits under the Income Tax Act to invest in an investment product.

Scheme #11: Interests Paid on Home Loans 

For people who want to claim a tax deduction on a housing loan, the conditions that need to be fulfilled are: 

• A home loan is taken for the construction or purchase of a home
• Construction must be completed in 5 years from the end of the financial year in which the loan was taken 
• Interest paid as part of the loan can be claimed as a deduction.

Scheme #12: Rent Paid and No HRA

Getting HRA as part of your salary is a primary tax-saving option while filing tax returns. But there is also a case when it is not part of your salary. In this case, a standard HRA cannot be claimed, and the taxpayer cannot claim the benefit even when they pay rent. In this case, the taxpayer must claim tax benefits under Section 80GG. 

Scheme #13: Medical Expenses Towards Disabled Dependents

As per section 80DD, taxpayers can claim deductions when they look after disabled dependents. This helps reduce the tax liabilities of the person caring for a disabled family member. 

Scheme #14: Any Donation Made to Charitable Institutions

Under Section 80G, a tax deduction is allowed on any donation made to an organization. The amount donated should be made by online transfer or cheque. This allows 100% of deductions of the amount paid. But any cash transferred above Rs. 2000 does not qualify for this deduction. 

Scheme #15: Repaying an Education Loan

Income tax provides tax benefits for the repayment of loans under Section 80E of the act. Once an education loan is taken, the interest paid on that loan qualifies for a tax deduction for a maximum of 8 years or when the total interest is repaid. The parent or child can claim the deductions depending on who is paying the EMI.  

What are the Income Tax Saving Plans for Parents with Single Income?

A single-income family with children needs to be prudent about their financial planning to help save taxes and fulfill family expenses: 

These include: 

• More than 20% of annual income must be allocated to market-linked investment plans providing EEE benefits. You can choose from options such as Unit Linked Insurance Plans (ULIPs), Child Plans, Equity Linked Savings Schemes (ELSS), and others. 
• Get tax exemption of up to Rs. 1.5 lakhs under Section 80C.
• Term insurance helps cover a sum assured that is equivalent to 15-20 ties in the annual income. 
• Public Provident Fund scheme.

Also, children’s tuition can be claimed under Section 80C. Any interest paid on education loans for funding higher education can be deductible under Section 80E. More than 1 lakh can be saved under Section 80D. 

As adults, you also need to plan your retirement. Save at least 10% of your annual income on the National Pension Scheme and more. 

Conclusion

As a new taxpayer, multiple tax-saving schemes in India can help you save money and ensure that you are paying the right amount of tax. If you are still unsure, it is best to talk to your accountant or a tax consultant who can help you get the best tax-saving benefit.