Tax-saving Instruments That Help You Build Wealth, Not Just Save Tax

No one likes paying more tax than they should. And thankfully, the Income Tax Act in India offers several ways to save. From deductions under Section 80C to benefits under Sections 80D, 80CCD(1B), and more—there are plenty of government-backed options designed to help you reduce your taxable income and achieve your financial goals.

But here’s the key: The best tax-saving instruments don’t just save tax. They help you plan for big things—like retirement, your child’s education, or creating a passive income stream.

What are your options? Let’s break it down

You don’t need to be a financial expert to start tax planning. Here's a simple overview of instruments that are both tax-efficient and goal-focused.

1. Public Provident Fund (PPF)

Backed by the government, PPF is one of the safest long-term tax-saving tools out there. You can claim deductions up to Rs. 1.5 lakh under Section 80C. Plus, both the interest earned and the maturity amount are tax-free.

With a 15-year lock-in, it's ideal for those building a retirement nest egg—but if you’re looking for more flexibility or shorter tenure, consider a Bajaj Finance Fixed Deposit. You get guaranteed returns up to 8.60% p.a. with tenures starting from just 12 months—no market risk, and no surprises. Invest now!

2. Tax Saver Fixed Deposit (FD)

Tax Saver Fixed Deposits (FD) are another popular option for tax-saving investments in India. These FDs allow you to invest up to Rs. 1.5 lakh in a financial year and claim a deduction under Section 80C of the Income Tax Act. The lock-in period for tax saver FDs is 5 years, and the returns are guaranteed, making them a low-risk investment option. The interest earned on these deposits is taxable, but the principal investment qualifies for tax deductions, reducing taxable income. Tax Saver FDs are ideal for conservative investors who prefer assured returns over higher-risk investment options. These FDs offer a higher interest rate than regular savings accounts, but they do not come with the same level of flexibility, as the investment is locked for five years. However, they are a good choice for those who want guaranteed returns without exposing themselves to market risks.

Unlike traditional savings accounts, a Bajaj Finance Fixed Deposit does not offer tax-saving option but it gives you the dual benefit of assured returns and flexible payout options—monthly, quarterly, or at maturity. If you're looking for predictability, it’s a solid pick.

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3. Equity Linked Savings Scheme (ELSS)

Want higher returns and are okay with some risk? ELSS could work for you. It invests primarily in equities and comes with a short lock-in of just 3 years. You get 80C benefits and the potential for high growth.

But if the market-linked nature of ELSS feels uncertain, a fixed deposit can balance your portfolio with guaranteed returns—even during volatile times.

4. National Pension System (NPS)

The National Pension Scheme (NPS) is a government-supported initiative aimed at providing retirement benefits to individuals. It is a long-term investment plan that allows individuals to contribute towards a pension corpus and receive tax benefits under Section 80C, as well as an additional tax deduction of up to Rs. 50,000 under Section 80CCD(1B). NPS provides individuals with exposure to both equity and debt instruments, allowing them to choose their preferred asset allocation. While the returns are market-linked and vary based on the performance of the chosen asset class, NPS provides the potential for higher returns in the long term. The accumulated corpus is used to provide a monthly pension after retirement. NPS offers a tax-free exit at the time of maturity, making it an attractive option for retirement planning. It is suitable for individuals who are looking for long-term growth with tax benefits and a regular income post-retirement.

5. Senior Citizen Savings Scheme (SCSS)

The Senior Citizen Savings Scheme (SCSS) is a government-backed savings scheme designed specifically for senior citizens aged 60 years and above. It offers higher interest rates compared to other fixed-income options and is eligible for tax benefits under Section 80C. The investment limit for an individual in SCSS is Rs. 15 lakh, and the interest is paid quarterly, making it an ideal source of regular income for retired individuals. The current interest rate for SCSS is higher than most savings accounts and fixed deposits, which is one of the major attractions for senior citizens. Although the interest earned is taxable, the security of the government backing makes it an attractive option. Furthermore, SCSS offers a lock-in period of 5 years, which can be extended by 3 years after maturity. This scheme is suitable for conservative investors looking for a stable income with tax-saving benefits. It provides regular interest payouts while contributing to long-term financial planning for senior citizens.

Many retirees also diversify into fixed deposits to ladder their income. Bajaj Finance FDs, for example, offer special rates for senior citizens (up to 8.60% p.a.) and predictable payouts to match their cash flow needs. Check out FD rates offered by Bajaj Finance.

6. Sukanya Samriddhi Yojana (SSY)

Sukanya Samriddhi Yojna (SSY) is a government-backed savings scheme aimed at promoting the welfare of the girl child in India. This scheme offers a high-interest rate and tax-saving benefits under Section 80C. It allows a minimum deposit of Rs. 250 per year and a maximum of Rs. 1.5 lakh per year. The investment is tax-deductible, and the interest earned is tax-free. Additionally, the maturity amount is also exempt from tax. The account is open in the name of a girl child, and it can be operated until she reaches 21 years of age. The scheme offers a guaranteed return, and the interest rate is typically revised annually by the government, making it an attractive option for parents planning for their daughter’s future. With its tax-free benefits and the focus on the girl child’s future, SSY is an excellent long-term investment option.

7. National Savings Certificate (NSC)

National Savings Certificates (NSC) are one of the safest and most popular fixed-income investment options in India, offered by India Post. They are eligible for tax deductions under Section 80C, with a fixed interest rate. The investment amount in NSC is locked for 5 years, and the interest earned is taxable, though it qualifies for reinvestment under Section 80C, allowing you to claim tax benefits on the interest amount as well. NSC is a secure option for conservative investors looking for guaranteed returns. It is an ideal choice for individuals who want to save taxes while maintaining a low risk profile. The post-office nature of NSC ensures high reliability, and the fixed interest rate offers peace of mind for investors seeking stable returns.

For those who prefer traditional instruments with minimal risk, both NSC and fixed deposits offer steady growth. The difference? With Bajaj Finance FDs, you have more control over payout frequency and tenure selection. Check out FD now and start investing.

8. Unit Linked Insurance Plan (ULIP)

Unit Linked Insurance Plans (ULIPs) are unique products that combine life insurance and investment in a single plan. ULIPs offer individuals the flexibility to invest in a range of funds, including equity, debt, and balanced funds. They provide tax-saving benefits under Section 80C, and the returns are tax-free after the 5-year lock-in period. ULIPs offer life insurance coverage, which is an added benefit for policyholders. However, ULIPs come with relatively high charges and fees, which can affect the overall returns. Despite this, ULIPs are suitable for individuals looking to combine their insurance needs with investment, offering a long-term wealth-building opportunity along with tax-saving benefits.

Component – Fixed deposit variants:-

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