Income Tax Saving: 5 investment options offering fixed interest rate without stock market volatility

Income Tax Saving: 5 investment options offering fixed interest rate without stock market volatility

Authored by CA Amit Gupta, MD, SAG Infotech

In the current market, you can save your income tax as there are various tax savers that are available in the market. However, there are some tax savings plans like NPS, ELSS mutual funds, and Ulips that are also market-based investments but due to non-fixation of the returns, multiple investors find it one of the causes to shun from.

If an individual looks toward fixed interest returning tax-saving investments without any volatility in the stock market then major investment choices that he/she can choose are Public Provident Fund (PPF), Post Office Time Deposit Account (POTD), National Savings Certificates (NSC), Bank 5-year tax saver, and Senior Citizens Savings Scheme (SCSC).

Under section 80C an individual could invest up to Rs 1.5 lakh a year in the above-mentioned investment schemes:

Saving Scheme for Senior Citizens’

Senior Citizens’ Saving Scheme (SCSS) is the most preferred option for retirees. SCSS poses a 5-year tenure, which could be prolonged by three years once the scheme would get matures. The maximum investment limit of SCSS would be Rs 15 lakh and any person can open one account or more than that. However, the same scheme would be available exclusively for senior citizens or early retirees. This scheme could be claimed through the post office or from the bank, and only people above age 60 can claim that. In SCSS early retirees can invest, given that they do the same within 1 month of obtaining their retirement funds.

Post Office Time Deposit Account (POTD)

A post office time deposit account (POTD) is for the duration of 1,2,3 and 5 years while the same is exclusively a 5-year deposit that takes advantage of the tax under section 80C.

National Savings Certificates

National Savings Certificates (NSC) is known as a 5-year scheme with a total amount to deposit. NSC is not engaged in furnishing monthly or yearly interest payout and secures a progressive choice. In addition, interest not reinvested in the last year of the period may qualify for Section 80C benefits for the year in which it is deemed to have been reinvested.

5-year notified tax-saving fixed deposits

Investing in the 5-year notified tax-saving Fixed deposits in a bank (a debt tax saver) is a superior decision for the people who had lapsed out of the Section 80C limit of Rs 1.5 lakh in a year. These types of deposits would arrive with monthly, quarterly, or cumulative interest payout options on the incurred investment.

Public Provident Fund

The public provident fund (PPF) scheme could be extended for infinite times in a span of 5 years. The same could be opened in a specified post office or a bank branch. PPF can be opened online with those banks who have enabled the online opening features for their customers. A public provident fund is appropriate for those investors who want to avoid the volatility in returns that usually runs in the equity asset class. But taking interest in the long-term plan when the inflation-adjusted target amount is much more than the same would be effective to choose these equity assets, via equity mutual funds, and ELSS tax saving funds, rather than depending only on the PPF.

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