Where should you put your hard-earned money in FY 2025-26 to save maximum tax and still grow wealth? With income tax slabs under the new regime and so many investment products available, choosing the best tax saving investments in India can feel overwhelming.
This guide will simplify your choices. We’ll cover government-backed safe options like PPF, long-term retirement schemes like NPS, market-linked investments like ELSS, and even high-risk avenues like direct equity. You’ll also see updated returns (2025 data), lock-in periods, tax benefits, and practical examples.
1. Safe Investment Options for FY 2025-26
Public Provident Fund (PPF)
Return (Q3 FY 2025-26): 7.1% per annum (government-backed, fixed quarterly)
Lock-in: 15 years (partial withdrawal from year 7)
Tax Benefit: Eligible under Section 80C (₹1.5 lakh limit)
Maturity: Completely tax-free (EEE – Exempt, Exempt, Exempt)
Example:
If Raj invests ₹12,500 per month in PPF (₹1.5 lakh annually), he saves up to ₹46,800 in tax (for 30% slab) and builds a tax-free corpus over 15 years.
Pros:
Safe, government-backed
Tax-free maturity
Good for long-term goals like retirement
Cons:
Long lock-in
Moderate returns (lower than equities)
a.Tax-Saving Fixed Deposits (FDs)
Return (2025): 6–7.5% depending on the bank
Lock-in: 5 years
Tax Benefit: Section 80C (up to ₹1.5 lakh)
Taxation: Interest taxable as per your slab
Pros:
Simple and safe
Fixed returns
Cons:
Interest fully taxable
Lower post-tax return for higher slabs
b.Sukanya Samriddhi Yojana (SSY)
Return (Q3 FY 2025-26): 8.2% (highest among small savings schemes)
Eligibility: For girl child below 10 years
Lock-in: Till 21 years of age or marriage after 18
Tax Benefit: 80C + tax-free maturity
Pros:
High return, tax-free
Secured for girl child’s education/marriage
Cons:
Restricted to girl child
Long lock-in
2. Medium Risk Investments for FY 2025-26
Equity Linked Savings Scheme (ELSS – Mutual Funds)
Historical Return: 10–14% annually (market-linked)
Lock-in: 3 years (shortest among 80C options)
Taxation: LTCG tax @10% above ₹1 lakh per year
Tax Benefit: Section 80C (up to ₹1.5 lakh)
Example:
If Priya invests ₹10,000 per month in ELSS, she invests ₹1.2 lakh in a year, saves tax, and potentially earns ₹13.5–14 lakh in 10 years (assuming 12% CAGR).
Pros:
High growth potential
Shortest lock-in under 80C
Ideal for long-term wealth creation
Cons:
Market volatility
Returns not guaranteed
a.National Pension System (NPS)
Return (historical): 8–10% annually (mix of equity, corporate bonds, govt securities)
Lock-in: Till retirement (partial withdrawal allowed)
Tax Benefit:
80C (₹1.5 lakh)
Extra ₹50,000 under Section 80CCD(1B)
Maturity: 60% lump sum (tax-free), 40% annuity (taxable)
Pros:
Extra ₹50,000 tax deduction (beyond 80C)
Retirement-focused
Professional fund management
Cons:
Lock-in till retirement
Annuity returns are taxable
b.Unit Linked Insurance Plans (ULIPs)
Return: 6–12% depending on fund choice
Lock-in: 5 years
Tax Benefit: Section 80C (up to ₹1.5 lakh)
Taxation: Premium-based exemption (conditions apply as per Budget 2021)
Pros:
Insurance + investment
Tax savings
Cons:
High charges compared to mutual funds
Returns depend on fund performance
3. High Risk, High Reward Options
Direct Equity (Stocks)
Potential Return: Historically 12–15%+ over long term
Taxation: LTCG @10% above ₹1 lakh, STCG @15%
Best For: Experienced investors with risk appetite
Pros:
Unlimited potential returns
No lock-in (except for IPO shares in some cases)
Cons:
High volatility
Requires knowledge & research
a.Real Estate Investment Trusts (REITs & InvITs)
Return (2025 average yield): 6–8% dividend yield + capital appreciation
Liquidity: Listed on stock exchanges
Tax Benefit: Not under 80C, but dividends partly tax-free
Pros:
Exposure to real estate with small investment
Regular income through dividends
Cons:
Market-dependent
Tax treatment can be complex
FAQs
Q1. Which is the best tax saving investment in FY 2025-26?
A: There’s no single best option. For safety, go with PPF. For growth, choose ELSS. For retirement, NPS is ideal.
Q2. Can I claim both PPF and NPS for tax saving?
A: Yes, PPF gives 80C benefits (₹1.5 lakh), and NPS offers an additional ₹50,000 under Section 80CCD(1B).
Q3. Should I invest in ELSS or NPS?
A: ELSS is better for liquidity (3-year lock-in) and wealth growth. NPS is long-term retirement-focused with extra tax deduction.
Conclusion
Tax planning for FY 2025-26 is not just about saving tax—it’s about creating wealth.
Safe investors: PPF, SSY, Tax-saving FDs
Growth-focused: ELSS, NPS
Risk-takers: Direct equities, REITs
The right mix depends on your age, goals, and risk appetite. Start early, stay consistent, and review annually.
Which tax-saving investment are you choosing this year—PPF, ELSS, or NPS? 💡
👉 Share your thoughts in the comments below.
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Personal Finance