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Long Term Investment Ideas for Tax Benefits

Long Term Investment Ideas for Tax Benefits

Tax-saving is an essential component of financial planning. An educated tax-planning approach may help individuals reach their financial objectives while also saving money on taxes.

Best Tax-Saving Investment Schemes

Some tax-saving investment tools to check out - 

1. FDs or Fixed Deposits

You can save taxes by investing in tax-saving Fixed Deposits that qualify for a tax deduction under Section 80C of the Income Tax Act of 1961. By investing in tax-saving fixed deposits, you can claim a maximum deduction of Rs.1.5 lakh per annum. Such FDs have a 5-year lock-in term, and the interest generated is taxable. The interest rate typically varies from 5.5 per cent to 7.75 per cent.

Several people notice the vast difference between their final tax amounts before and after-tax planning. To better recognize tax planning, you must know its important features and how people benefit from it.

2. Public Provident Funds

The Public Provident Scheme is a popular tax-saving investment instrument. To get started with this long-term savings and investment plan, you must first create a PPF account at the post office or approved branches of public and private sector banks. Contributions to the PPF account earn a fixed rate of return. On these deposits, you can claim Section 80C deductions of up to Rs 1.5 lakh in a fiscal year.

3. ULIPs

ULIPs or Unit Linked Investment Plans are long-term insurance-cum-investment products that provide you with the option of investing in equity funds, debt funds, or both. ULIPs allow you to swap between funds in accordance with your financial objectives. You can save taxes by investing in ULIPs under sections 80C and 10(10D) of the Income Tax Act of 1961.

4. Senior Citizen Saving Plans

The Senior Citizen Savings Scheme (SCSS) is a government-sponsored savings mechanism for those over the age of 60 that provides a stable and safe source of income in their post-retirement phase, while also offering fairly high returns.

The main amount deposited in an SCSS account is tax-deductible under Section 80C of the Income Tax Act of 1961, up to a ceiling of Rs. 1.5 Lakh per annum. This exemption, however, is only eligible under the current tax saving scheme. It is not permitted if a person chooses to file tax returns using the new method announced in the Union Budget 2020.

5. Life Insurance Plans

Life insurance is an essential part of an individual's financial portfolio since it provides protection to the individual's family in the event of an unforeseen disaster. As a result, it is the breadwinner's major obligation to obtain life insurance as soon as possible for the family's protection.

Life insurance, whether traditional (endowment) or market-linked (ULIP), provides policyholders with tax breaks on premiums.

Life insurance products, regardless of their nature, provide tax advantages to policyholders.

Life insurance premiums are exempt from tax under Section 80C of the Income Tax Act up to a maximum of Rs 1.5 lakhs per annum. Section 10(10D) provides that proceeds on death or maturity are tax-free If the policy is surrendered or cancelled within five years, the policyholder is not eligible for the claimed deductions.

The interest received, however, is subject to taxes in accordance with the appropriate tax slab of the taxpayer in question.

6. Pension Plans

Pension plans are yet another type of life insurance. They serve a distinct purpose than other types of insurance plans, such as term and endowment policies, and are referred to as protection plans. While protection plans are designed to financially safeguard a person's family in the event of his death, pension plans are designed to provide for the man and his family if he outlives the policy term.

Pension contributions are exempt under Section 80CCC (a sub-section of Section 80C) of the Income Tax Act. The total deduction limit under all sub-sections of Section 80C cannot exceed Rs 1.5 lakhs..

At maturity, one-third of the accrued pension amount is tax-free, while the remaining two-thirds is recognized as income and taxed at the marginal tax rate. When the recipient dies, the cash is tax-free.

7. Mediclaim

Health insurance, or Mediclaim as it is more often known, pays for expenditures incurred as a result of an accident or hospitalization. Pre- and post-hospitalization expenditures are also covered by Mediclaim, subject to the sum promised.

Section 80D of the Income Tax Act provides tax incentives for health insurance.

According to Section 80D of the Income Tax Act, Senior Citizens may avail a higher deduction of up to ₹ 50,000 for payment of premium towards medical insurance policy. The limit is ₹ 25,000 in case of Non-Senior Citizens.

Further Section 80DDB of the Income Tax Act allows tax deduction on expenses incurred by an individual on himself or a dependent towards the treatment of specific diseases as stated in the act. The maximum deduction amount in case of a senior citizen is ₹ 1 lakh (₹ 40,000 for Non-Senior Citizen taxpayers)

8. NPS

The Pension Funds Regulatory and Development Authority - PFRDA - oversees the New Pension Scheme (NPS). It is open to all Indian citizens between the ages of 18 and 60. It is particularly cost-effective due to the minimal fund management fees. The money is managed by the fund managers in three different accounts with diverse asset profiles: equity (E), corporate bonds (C), and government securities (G). Investors can manage their portfolios actively (active choice) or passively (passive choice) (auto choice).

Contributions to the NPS are exempt from income tax under Section 80CCD of the Income Tax Act. The total deduction allowed under this provision, coupled with Sections 80C and 80CCC, cannot exceed Rs 1.5 lakhs.

An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B)

Given the variety of possibilities, NPS is especially beneficial for those with various risk tolerances who want to save for retirement.

9. Mutual Funds

Tax breaks are available for investments in tax-saving mutual funds, generally known as equity-linked savings schemes (ELSS). Tax-advantaged mutual funds invest in stocks and other assets and are best suited for investors with a medium to high-risk tolerance. Investments are guaranteed for three years.

Investments in tax-saving mutual funds are tax-deductible up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Section 10 (10D) provides that proceeds on death or maturity are tax-free subject to conditions.

Plan Your Tax-Saving Investments

The tax-saving season begins on April 1 for taxpayers. A good tax-saving investment should give not only tax exemption but also generate tax-free revenue.

SRather than waiting until the end of the fiscal year and going for ad hoc tax-saving tools, it would be a wiser way to begin investing in the early quarters of the fiscal year so that taxpayers may plan their investments and reap maximum benefits. When deciding on the best tax-saving investing strategy, consider factors such as fund safety, liquidity, and return size.

Most tax-saving investment schemes fall under Section 80C of the Income Tax Act, which allows the taxpayer to claim an exemption of up to Rs 1,50,000. ELSS (Equity Linked Saving Scheme), Life Insurance, National Savings Scheme, Public Provident Fund, Fixed Deposits, and Bonds are some of the alternatives available to investors.

Tax-Advantaged Investments for Seniors and Retirees

Because there is no monthly paycheck going into your account after retirement, there must be a consistent flow of cash to manage your routine costs. So, what alternatives do the elderly have?

Senior folks can choose annuity plans, which assure a steady flow of funds into their accounts while also allowing them to save on taxes. One such plan is the government's 'Senior Citizen's Saving Scheme,' which may be obtained through a post office or a bank by people over the age of 60. SCSS has the advantage of premature withdrawals, in addition to tax savings under Section 80C.

Unit Linked Insurance Plans (ULIPs) are a suitable alternative for retirement fund creation since they provide for up to Rs 1.5 lakh in tax exemption on premiums paid under Section 80C and the possibility to receive tax-free earnings at maturity under Section 10(10D).

Summing Up

So, these were some long-term investment ideas with tax benefits. These plans offer maximum returns and also help you save up a great deal on taxes, making them some of the best income tax-saving investment options.


The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

Suggested Plans

Bharti AXA Life Guaranteed Wealth Pro

  • A non-linked, non-participating individual savings life insurance plan
  • Flexibility to choose the payout structure
  • Multiple income options
  • Option to receive tax free income beginning from the second policy year itself
  • Option to get lifelong income along with life cover till 100 years of age

Bharti AXA Life Flexi Term Pro

  • A Non-linked, Individual, Non-participating Pure Risk Premium Life Insurance policy
  • The plan offers two options: Without Return of Premium and With Return of Premium
  • Under the Without Return of Premium variant, you have the option between Single Life cover or Joint Life Cover i.e., cover for your spouse under the same policy.
  • Flexibility in policy and premium payment terms

Bharti AXA Life Super Series

  • A non-linked non-participating individual life insurance savings plan
  • Range of investment duration and returns
  • Guaranteed money back benefits (provided policy is in force and all due premiums have been paid)
  • Income tax benefits (as prevailing tax laws in India that are subject to changes)