Where to invest to save tax? Which one to select among insurance policy, national saving certificate, provident fund, mutual funds and others, to save tax?

August 18th, 2010| Finance.

Where to invest to save tax? Which one to select among insurance policy, national saving certificate, provident fund, mutual funds and others, to save tax?

Take insurance policy only for getting insured. Tax exemption is an additional benefit of insurance policy. Select provident fund option if your want to get the benefits of savings and have protection, for long run purposes. National Savings Certificate (NSC) is also similar to Provident Fund in giving 8% interest. The principle amount along with interest is given back in six years. But the interest provided on NSC  will attract tax along with principle amount. Based on income, tax on income, lock in period, equity linked saving scheme (ELSS) mutual funds are better than NSCs. Lock in period for NSC is six years. ELSS lock in period is three years only. If profit is gained in between, dividend is added to mutual funds. Unlike in NSC, there  is no need to pay tax for the income in mutual fund. In the last three years, annual income on ELSS mutual funds is more than 8%.

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