Best Tax Saving Schemes in India in 2016

Best Tax Saving Schemes in India for 2016Best Tax Saving Schemes in India in 2016


Everyone is busy looking for tax saving tips now. There are various ways where you can invest in tax saving schemes in 2016. You are eligible for tax exemption u/s 80C to the tune of Rs 1.5 Lakhs. Which are the best tax saving Schemes in India to invest in 2016? Which top tax saving schemes would suit you better? In this article, we would provide top and best tax saving schemes in India that can be invested in 2016.

What is Tax Saving Scheme?


Taxes saving schemes are those which would provide an income tax exemption for you. As per section 80C, you can invest upto Rs 1.5 Lakhs in these tax saving schemes and get exemption from your taxable income. However, all schemes may not be suitable to you. You should invest in tax saving schemes that suits you in terms of risk appetite, tenure etc.,

Best Tax Saving Schemes in India in 2016


ELSS - Top tax saving schemeInvest in Top and Best ELSS Tax Saving Mutual Funds


  • Basically, you are investing in mutual funds either in lump sum (one time) or through SIP (investing every month for a pre-defined period).
  • It has a lowest lock-in period of 3 years compared to other tax saving options.
  • You can opt for dividend option so that you would get regular income before maturity.
  • Invest through SIP every month which can help you to fetch high returns. However, each SIP would have lock-in period of 3 years. ‘
  • Dividend from such mutual funds are tax free in the hands of investors. ELSS mutual funds are classified as equity funds, hence the returns / capital gains from such ELSS funds are tax free.
  • You can invest in best ELSS Tax Saving Mutual funds like Axis Equity mutual fund, Franklin India tax shield fund, Reliance tax saver fund, BNPP long term equity fund, Religare Invesco tax plan etc.,
  • This is one of the best tax saving schemes in India as it has lowest lock-in period and we can expect higher returns.

Invest in Public Provident Fund (PPF)


  • PPF-Best tax saving investment optionPublic provident fund is every one’s favorite tax saving option.
  • PPF account has 15 years tenure.
  • The interest rate is around 8.7%. Govt. of India would review this every year and can change.
  • Partial withdrawal available from 6th financial year onwards.
  • Minimum investment is Rs 500 and the maximum investment is Rs 1.5 Lakhs per annum.
  • Interest is tax free.

Invest in Tax Saving Bank FD Schemes offering highest interest


  • Banks offer tax saving fixed deposit schemes which has 5 year lock-in period.
  • There are no minimum and maximum limits for investment.
  • Interest is taxable. Investors need to show this interest under “Income from other sources” every year and pay income tax pertaining to it.

NPS – New Pension Scheme / National Pension Scheme


  • NPS is one of the best tax saving schemes in 2016.
  • You can open this with any authorized bank, which provides NPS option.
  • You can invest as low as Rs 500 per month, i.e. Rs 6,000 per annum.
  • There is no maximum limit to invest in this scheme.
  • Though returns are not guaranteed, you can expect 4% to 14% per annum returns. Last year, some of the NPS funds have provided 14% returns.
  • You can opt for equity funds or debt fund option, depending on your age and risk appetite.

National Saving Certificates (NSC)


  • NSC-Best Tax saving schemeNational Saving Certificates are issued by the post office.
  • NSC tenure is for 5 years.
  • Interest rates are 8.5% for 5 years NSC.
  • Interest rates are compounded every half year.
  • If you invest Rs 100, after 5 years, you would get Rs 151.62.
  • Interest received from NSC is taxable. You need to show this under “Income from other sources” and pay income tax on that every year.

Voluntary Provident Fund (VPF)


Generally contribution from employer and employee towards provident fund goes to EPF account. However, the employee can still invest additional amounts in PF account by way of Voluntary provident fund.

  • There is no obligation from employer on VPF. Only employees can contribute to this.
  • The maximum amount that can be invested in EPF is 100% of basic salary + DA.
  • Interest rates are same as EPF interest. Currently it is around 8.5%.

Rajiv Gandhi Equity Saving Scheme (RGESS)


If you are a first time investor in the stock markets, you can invest in the stock market and get exemption up to Rs 25,000 from your taxable income.

  • An investor can invest in stocks and mutual funds to the tune of Rs 50,000 and based on this, they would get Rs 25,000 exemptions from your taxable income.
  • An investor should invest in any stock of BSE100 or qualified mutual fund under RGESS.
  • Returns from stocks or RGESS mutual funds are tax free after 1 year.

While there are several best tax saving options, one should invest in option which suits them better in terms of risk appetite and based on tenure. One should not forget that all aggregate tax saving options put together, one can invest up to a maximum of Rs 1.5 Lakhs u/s 80C.

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Best Tax Saving Schemes in India in 2016

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