I want to save tax. I am not sure to invest in ELSS, Ulips, fixed deposits or any other product? I am looking at good 15-20 per cent returns.
Santosh Kumar, Patna
Using the Section 80C tax deductions to invest is a good start and it could be optimised if you can align your tax saving benefits with your financial goals than be driven with the idea of only saving taxes. There are several products, in which investments qualify for tax deductions under Section 80C up to Rs 1.5 lakh in a financial year.
ELSS, premiums on life insurance policies, Ulips, PPF, bank fixed deposits and pension plans are some of the product categories that you can consider. The lock-in and assured or market-linked returns varies for each of these products. For instance PPF, NSC and bank fixed deposits provide guaranteed returns, whereas Ulips and tax planning funds have a market-linked return. However, none of these instruments guarantee 15-20 per cent return that you are expecting. If you are looking for guaranteed returns, with the shortest lock-in; the five-year bank fixed deposit is the ideal investment option for you to save taxes. If you can stomach some risk, the three year lock-in of tax planning funds can suit your requirements. Depending on your comfort, you can select any of the products to invest and save taxes.
