For most people, choosing an investment is about striking the right balance between returns and tax savings. While safety and liquidity are important, the ultimate goal is to grow wealth efficiently. Fortunately, there are several high-return investment options in India that also offer tax benefits. By combining smart planning with tools like an income tax calculator, investors can select the best investment plan suited to their goals.
Investment Options that Provide High Returns and Tax Benefits
When evaluating investments, one must look at both potential returns and tax exemptions under the Income Tax Act. Below are some of the top options that combine wealth creation with tax savings.
1. Equity-Linked Savings Scheme (ELSS)**
ELSS is a diversified equity mutual fund with a tax-saving benefit under Section 80C.
- Why it is attractive: ELSS mutual funds have a lock-in of just 3 years, the shortest among all Section 80C options.
- Returns: Market-linked; historically, ELSS funds have delivered higher returns compared to traditional tax-saving instruments.
- Tax Benefit: Investment of up to ₹1.5 lakh annually qualifies for deduction under Section 80C (under the old regime).
- Ideal for: Young investors seeking the best investment plan for long-term growth with equity exposure.
2. National Pension System (NPS) **
NPS is a government-backed retirement savings scheme that offers market-linked growth.
- Why it is attractive: Provides both retirement planning and tax benefits.
- Returns: Market-linked; typically between 8–10% depending on asset allocation.
- Tax Benefit: Section 80C deductions available up to ₹1.5 lakh. An additional ₹50,000 deduction available under Section 80CCD(1B).
- Ideal for: Individuals planning for retirement while also wanting a tax-efficient strategy. An income tax calculator can help determine the exact savings possible.
3. Public Provident Fund (PPF) **
PPF is a long-term, government-backed savings plan with guaranteed returns.
- Why it is attractive: PPF offers both safety and steady returns.
- Returns: Around 7–8%, revised quarterly by the government.
- Tax Benefit: Investments qualify under Section 80C. In addition, the interest earned and maturity proceeds are tax-free (EEE status).
- Ideal for: Conservative investors who want security and tax-savings may find this the best investment plan for their needs.
4. Unit Linked Insurance Plans (ULIPs) **
ULIPs combine life insurance coverage with market-based investment opportunities.
- Why it is attractive: ULIPs provide dual benefits – life insurance cover and market-linked returns.
- Returns: Varies with fund selection; equity-based ULIPs can deliver higher returns.
- Tax Benefit: Premiums qualify under Section 80C. In addition, the maturity proceeds are exempt under Section 10(10D), subject to conditions.
- Ideal for: Individuals who want both protection and wealth creation may find this the best investment plan.
5. Tax-saver Fixed Deposits**
Tax-saving FDs are bank deposits with a 5-year lock-in that offer assured returns.
- Why it is attractive: FDs provide guaranteed returns with low risk.
- Returns: Around 6–7% annually, depending on the bank/provider.
- Tax Benefit: Investment up to ₹1.5 lakh under Section 80C. However, interest earned is taxable.
- Ideal for: Risk-averse investors looking for stability. An income tax calculator can help determine net gains after tax deduction.
6. Sukanya Samriddhi Yojana (SSY)**
SSY is a small savings scheme designed to secure the financial future of a girl child.
- Why it is attractive: Specifically meant for parents of girls; offers high interest and tax savings.
- Returns: Currently around 8.2% (government notified).
- Tax Benefit: Contributions qualify under Section 80C; Interest and maturity proceeds are tax-free (E-E-E status).
- Ideal for: Parents seeking the best investment plan for their daughter's education or marriage.
7. Real Estate Investments with Tax Deductions**
Real estate allows wealth creation through property appreciation and home loan benefits.
- Why it is attractive: Property investments can offer high returns over the long term, along with tax benefits on home loans.
- Returns: Property values often appreciate over time, offering long-term wealth creation.
- Tax Benefit: Deduction of up to ₹2 lakh on home loan interest under Section 24(b). In addition, principal repayment is eligible under Section 80C.
- Ideal for: Individuals looking to diversify and secure assets, while reaping tax benefits.
When choosing the best investment plan from the above options that also offers tax savings, remember that certain tax benefits are only available under the old regime.
In addition, it is important to not just look at returns but also the tax liability. Using an income tax calculator ensures you have a clear idea of how much you save with each option.
Furthermore, maintaining discipline in other financial areas is crucial. A regular CIBIL score check ensures that your creditworthiness remains strong. A healthy credit profile allows you to access loans at favourable terms, which can complement your investment strategy. Combining good credit habits with tax-efficient investments can lead to stronger long-term financial health.
** Tax exemptions are as per applicable tax laws from time to time.
