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Tax saving

Tax Savings! Well, for many of us, it is the most dreaded task; especially at this time of the year.

Reason? Could be any or all of the following...

  • Confused about investment options (the most common one)
  • Returns on previous investments were much below expectations
  • Hate funds being locked up during the lengthy lock-in periods

Whatever be the cause, we understand how intimidating tax saving can seem. So, we’ll make it a little easier for you. Here is what you can do-

Tax-Saving Instruments

Depending upon your personal preferences, such as returns, flexibility, liquidity, safety, transparency and others, you may choose to invest in one or multiple tax-saving instruments. These instruments are issued either by private institutions or the government and vary in their investment strategies. They should be chosen carefully to meet your financial objective, rather than merely your goal of tax-saving.

An additional deduction for investment up to Rs. 50,000 in NPS is available to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of the Income Tax Act.

Risk Parameters:

Your decision to choose an investment option has a lot to do with your risk bearing capacity. While most tax saving options fall between the low to a medium risk category, there are a few, like ELSS and ULIP, which park most of your funds in the equities market, making them high-risk instruments.

Returns on tax-saving investments

Agree or not, returns on investments are the top-influencer in the decision-making process. So, let’s take a look at the average returns (appx) on each of the tax-savers over the last few years.

As expected, the higher your exposure to equities, the higher are the returns. Though, a few investments targeted as post-retirement saving plans, such as Senior Citizens’ Saving Scheme and NPS have also fared better than most. Fixed Deposits turn out to be the least remunerative, owing to their taxable interests, after which the net returns are barely 4.5-5% (almost at par with inflation). Insurance, though tax-free, has a history of minimal returns.

What is the ideal instrument to save tax?

The big question now is what is the right investment mix for you? With so many factors, such as risk, returns and lock-in period at play, what serves as the better option for every investor?


Saving tax is one objective. But it would be so good, if, in the process, you could also build wealth. Let us take a look at the investment option from this perspective.

PPF may be an excellent tax-saving instrument but at the current interest rate of 7.9%, it is not the smartest way to create wealth. Other options, such as Pension Plans and NPS have a very long accumulation phase. Senior Citizens’ Saving Scheme, NSC and FDs fall in the same category where the returns barely beat inflation, making them an unfavourable wealth creation option. Insurance, as we all know, is best used to secure your financial risks rather than enhancing your wealth.

ELSS, however, have been a favourite amongst tax-payers due to their excellent track record. Though they reap benefits over a relatively longer period, the pay-off is much higher when compared to a PPF (15 years lock-in). As per records, the valuation of the worst performing ELSS (over a 15-year period) is thrice as much as the same funds invested in PPF after maturity. Not only do ELSS deliver an efficient ROI when compared to other investment tools, but they also have a shorter lock-in period (just 3 years) and offer utmost flexibility to exit in case you decide to do so after 3 years.

Want to know which ELSS fund should you invest into and their performance track record, email us at blogcontent@ventura1.com

You May Also Like to Read: Is Inflation Moving too Fast for Fast Moving Consumer Goods Companies?


We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.


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