While everyone wishes to invest in the various schemes that offer valuable returns, not many wish to take the risk. Read on to know more about the tax savings investment schemes for low-risk investors.
Choosing the right tax-saving investing instrument may not be easy. Some provide market-linked returns, i.e., the returns are not fixed, and it depends on the underlying securities such as debt funds and equity funds’ performance. And, other investment options offer assured returns.
Selecting between the two will greatly depend on how much risk you are willing to take with your investment and other factors like liquidity. If you have a high risk-taking capacity, you can invest more in market-linked investment products as these products also have high returns potential. But, if you are looking for a risk-averse investment option, you can invest in a more stable investment that offers assured returns.
Some of the most popular low-risk and tax-saving investment options that you can consider investing in are:
Public Provident Fund
The Public Provident Fund or PPF is a government-backed long-term savings scheme that allows you to invest a small amount periodically in the PPF account through the working years and build a retirement corpus. It comes with a lock-in period of 15 years, which means you cannot withdraw the funds until the end of the term. You can also further extend the investment period in blocks of five years.
You can open a PPF account with any bank or post office. The returns on PPF are subject to change every quarter, and it is compounded annually. So, the earlier you start investing, the longer time you have to let your money grow. Also, the amount you invest in PPF is eligible for tax benefit under Section 80C of the Indian Income Tax Act.
Senior Citizens’ Savings Scheme
Retirement is an inherent part of life; you must retire at some point in life. And, to ensure that the second innings of your life is financially secured, you must invest wisely. One of the best ways to invest in your retirement is a senior citizens savings scheme. As the name suggests, the scheme is available only for people aged 60 years or more and early retirees.
You can invest in SCSS through a bank or post office. It comes with a lock-in period of five years, which can be extended for three years after maturity. One of the important features of this scheme is that you can open more than one account and the maximum amount you can invest in the account is 15 lakhs. The scheme gives you assured returns in the form of interest that is fixed at the time of opening the account, and it remains the same throughout the investment term.
Sukanya Samriddhi Yojana
As of June 2020, Sukanya Samriddhi Yojana or SSY fetches an interest rate at 7.6%, which is compounded annually. The scheme is known to offer the highest tax-free returns with a sovereign guarantee, and it enjoys the EEE (Exempt-Exempt-Exempt) tax status. The plan is specially meant for the benefit of the girl child; you can open this account any time after the child’s birth until she turns ten years old.
The minimum amount you must invest is Rs. 250 annually, and the maximum amount you can invest in a financial year is Rs. 1.5 lakhs. The account remains operative for 21 years from opening or until the girl gets married after she turns 18.
Apart from the above tax-saving investment schemes, you can also consider investing in 5-year tax-saving fixed deposits, National Savings Certificate, Post office Time Deposit Account, etc.