Tax Troubles? We've Got You Covered!
Tax Advisory Services
Get Expert Consultation Now!
  • 2500 Cr. Saved Already!
  • Trusted by 1 Million+
  • 10+ Yr. of Industry Experience
Tax Advisor

10 Best Tax Saving Schemes in 2023

Updated on: 17 Jan, 2023 06:50 PM

How much tax can I save? What is the lock-in period? How much tax deduction under Section 80C can I avail of? Are some part of my salary except the income tax?
These are common questions that bother taxpayers every time when they look up an ideal tax-saving instrument or product. Tax-saving schemes or plans are those financial products that help taxpayers to save tax at the time of filing their ITRs. It ultimately helps them in reducing their financial stress They end up reducing their tax burden via investing in any of such financial schemes. Salaried people find it very helpful and interesting. It lets them deduct a good amount of tax and avail the benefit of other exemptions when they file their income tax returns. This guide highlights the top 10 tax-saving schemes for 2023. Using this, you can choose the best-suited investment instrument that helps you save more money.

A Checklist for 10 Best Tax Saving Schemes in 2023

The New Year is knocking on the door as December is rolling up. Therefore, it is the best time to learn more about the top 10 tax-saving schemes for the upcoming year. Interestingly, the Indian marketplace is full of such tax-saving schemes or investment options. But before that, let’s jump up to the particular income tax sections under which these investment instruments offer tax deductions. Have a look:

Index Income Tax Saving Investments Option for 2023 Particular Income Tax Section Under Which It Offers Tax Deduction
1. PPF (Public Provident Fund) Section 80C
2. NPS (National Pension Scheme) Section 80C, 80CCD
3. ULIPs Section 80C
4. Tax-saving MF or ELSS Fund Section 80C, 10(10D)
5. Health insurance Section 80D
6. Life Insurance Section 80C, 80CCC, 80CCD, 10(10D)
7. Pension Plans Section 80CCC
8. Senior Citizen Saving Scheme Section 80C
9. National Savings Certificate Section 80C
10. Bank FDs Section 80C

PPF (Public Provident Fund)

Public Provident Fund or PPF will remain at the top of the list of the best 10 tax-saving schemes for 2023. It has a 15-year-long lock-in period. Therefore, it is a long-term investment plan offered by the government of India. It is a good option for people who are less interested in carrying risks associated with ELSS. Additionally, it offers complete capital protection to its users. An individual can avail of up to 1.5 lakh tax exemption when he invests in this risk-free investment scheme. Check out certain benefits associated with Tax Planning Optimizer to save more money.

Interest rate 7.1%
Investment Amount Minimum ₹ 500 Deposit
Investment Tenure 15 Years
Tax Benefits ₹1.5 lakh exemption of Section 80C

NPS (National Pension Scheme)

The NPS is a market-linked product regulated by PFRDA (Pension Fund Regulatory and Development Authority). It supports systematic savings for Indian citizens who want to save money for their retirement. However, it is another popular tax-saving scheme suggested by tax experts. It is a flexible and portable scheme. Earlier this scheme was designed for government employees. Later in 2009, it was made available for all salaried persons.
It is a good option for saving up to 2 lakh rupees in taxes. Any individual in the age group of 18 to 60 years can contribute to this retirement scheme. When someone contributes to the NPS program, he will be eligible to avail of up to 1.5 lakh rupees tax deduction under section 80C. plus, an additional deduction of Rs. 50,000 under Section 80CCD(1B).

Interest rate 9% to 12%
Investment Amount Minimum ₹ 500 Contribution
Entry Age Up to the age of 70 Years
Tax Benefits ₹1.5 lakh exemption of Section 80C + ₹50,000 under Section 80CCD(1b)

ULIPs (Unit-Linked Insurance Policies)

ULIPs - Unit-linked insurance policies are safe, secure, and convenient investment cum insurance policies. These policies are best suited for policyholders who want financial planning for better returns in terms of long-term goals. Under Section 80C of the Income Tax Act, 1961, the policyholders can avail of up to a 1.5 lakhs deduction in the taxable income on any investment instruments (for example, in this case, ULIPs) in a financial year.
Section 10 of the Income-tax Act provides for tax exemption on the sum received under a life insurance policy. Amid the changes in Section 10 of the Financial Act, the Fourth and Fifth Provisos have set a limit on the exemption. Now, the high premium Unit linked insurance policies and plans are restricted for availing tax exemption. As per these provisos, if any ULIPs issued on or after 01-02-2021 with a high premium, exceeding the limit of Rs. 2,50,000, then it will consciously affect the eligibility of the assesses for availing tax exemption on such policy or plan. In short, there would be no exemption. Take the assistance of professional CAs to know more.

Interest rate 2.25% to 9.00%
ULIPs’ Provider Name HDFC Life, Canara, Aegon Life, Edelweiss Tokio Life Insurance, SBI Life, Reliance Life, ICICI Prudential, Bajaj Allianz, Max life insurance, DHFL Pramerica Life Insurance, Kotak Mahindra Life, and Aviva Life Insurance
Investment Tenure 10 to 20 Years
Tax Benefits ₹1.5 lakh exemption of Section 80C

Tax-saving MF or ELSS Fund

Mutual fund managers find investing in stocks/mutual funds a good decision. However, there are some risks associated with bad phases in the market. Yet, mutual funds or ELSS funds are renowned as the best tax saving options for people who have less liquidity in their hands and want to reduce their tax burden. They can invest in mutual funds with min. 500 rupees contribution. There is a minimum lock-in period of three years. Plus, ELSS funds have the potential to offer higher returns in less time. You can save up to Rs 46,800* taxes by investing in top-recommending MF or ELSS funds. That is why these funds are fondly known as tax-saving MF (mutual funds).
The only thing to remember is- there are many consistent outperformance funds. Research them thoroughly before investing. Ensure your long-term wealth generation along with the right investment product.

Interest rate 15% to 18%
Investment Amount Minimum ₹ 500 Deposit
Investment Tenure 3 Years
Tax Benefits ₹1.5 lakh exemption of Section 80C,10(10D)

Health insurance

Though there is a plethora of tax-saving schemes available. Health Insurance is one that every salaried person should buy. It covers unexpected medical expenses and hospital bills along with tax benefits under section 80D of the Income Tax act 1961. You can also avail up to Rs. 5,000 tax benefits for preventative health check-ups per year.

Interest rate
Investment Amount No Cap on Minimum Investment
Entry Age Any Adult of 18 to 65 Years
Tax Benefits Up to ₹50,000 Exemption under Section 80D for Age below 60 Years (for self & parents)

Life Insurance

Life Insurance, or LIC, has been one of India’s most popular tax-saving schemes for decades. Many people consider LIC plans as the best investment products. All plans overstate the importance of insurance plans in one’s life. Consider the coverage policy terms, sum assured, etc., to pick the best plan for you and your family.
However, tax exemptions are offered under 80C with these insurance plans. It is valid only if the total premium is less than 10% or 20% of the sum assured and if the policy is purchased before 31st march 2012. Here also, the maximum deduction you can claim is up to 1.5 lakh.

Interest rate 2.25% to 9.00%
Investment Amount No Cap on Maximum Investment
Investment Tenure Up to 100 Years
Tax Benefits ₹1.5 lakh exemption of Section 80C

Pension Plans

Pension funds, NPS, Immediate Annuity Plans, and Deferred Annuity Plans are some examples of pension plans to secure your financial future. Pension plans serve specific purposes. For normal taxpayers who are aged below 60 years, 2.5 lakh income is tax-free; for retired taxpayers who are aged above 60 years, 3 lakh income is tax-free; for super senior citizens who are aged above 80, 5 lakh income is tax-free for AY 2023-24. Apart from this, a retired employee can claim an additional 50,000 rupees deduction against his salary income. Section 80CCC is the particular section that offers up to a 1.5 exemption limit for those individual taxpayers who have taken some pension plans.

Interest rate 2.25% to 9.00%
Investment Amount No Cap on Maximum Investment
Investment Tenure Up to 100 Years
Tax Benefits Up to ₹5 lakh exemption of Section 80C, 80CCC

Senior Citizen Saving Scheme

SCSS is an attractive investment scheme backed by the government of India. Indian citizens who are aged above 60 should consider this saving scheme for their future investments. Presently, it offers a 7.4% interest rate which is the highest rate offered by other government-backed plans. Here, the principal amount is eligible to claim a tax deduction under section 80C. The earned interest is taxable according to the tax slab applicable.

Interest rate 7.4%
Investment Amount Minimum ₹ 1000 Deposit && Maximum Cap of ₹ 15 lakh
Investment Tenure 5 Years
Tax Benefits ₹1.5 lakh exemption of Section 80C

National Savings Certificate

It is a fixed-income investment scheme focused on catering to small and middle-income investors. Just like PF, National Saving Certificate is an interesting tax-saving scheme with low risk. With the NSC program, you’ll receive a 6.8% annual interest. The qualified tax deduction is up to Rs. 1.50 lakh. Additionally, the total earned interest is also eligible for tax exemption.

Interest rate 6.8%
Investment Amount Minimum ₹ 1000
Investment Tenure 5 Years
Tax Benefits ₹1.5 lakh exemption of Section 80C

Bank FDs

Bank FDs are vital for safeguarding risks associated with the ups and downs of the market. Bank FDs generally ensure to give a prefixed interest rate throughout the decided tenure. Hence, it is considered a low-risk investment. Millions of people find it the safest financial tool for better savings. That is why it is one of the oldest savings options in India. It helps investors to grow gradually. Here, the minimum tenure is five years. While choosing this financial system, you’ll be eligible for a 1.5 lakh tax exemption limit per annum.

Interest rate 5.5% to 7.5%
Investment Amount Minimum Investment is Rs. 1000
Investment Tenure Lock in Period of 5 years
Tax Benefits ₹1.5 lakh exemption of Section 80C

Frequently Asked Questions

Q- How to save tax in 2023?

Some recognized tax-saving schemes include Insurance Policies, ELSS Plans, Tax-saving FD, Provident Funds, SCSS, etc. Invest your money in any of such policies or plans so that you can avail of up to 1.5 lakh tax exemption under section 80C.

Q- Which is the best SIP for investment?

Let’s give a quick glimpse at a list of top SIPs for investment:

  1. Axis Long Term Equity Fund
  2. Mirae Asset Tax Saver Fund
  3. Invesco India Tax Plan Fund
  4. Quant Tax Plan (new addition)
  5. Canara Robeco Equity Tax Saver Fund

Q- Which tax saving scheme is the best for 2023?

Some of the best Tax Saving Schemes in 2023 are:

  1. Axis Long Term Equity Fund
  2. Mirae Asset Tax Saver Fund
  3. Invesco India Tax Plan Fund
  4. Quant Tax Plan (new addition)
  5. Life Insurance
  6. Canara Robeco Equity Tax Saver Fund
  7. DSP Tax Saver Fund
  8. Bank of India Tax Advantage (new addition)

Q- Which one is better, SIP or PPF?

Analyze what kind of return you want from your investment; what is your risk appetite? The SIP gives a higher return of approximately 12% to 15%, but it is linked with higher risks associated with market fluctuations. On the other hand, PPF (Public Provident Fund) is a safer scheme that offers returns @7.6% per annum.

Q- Which investment is 100% tax-free?

PPF (Public Provident Fund), Life Insurance Policies, NPS (New Pension Scheme), and other tax saving schemes offer tax benefits under sections 80C, 80CCD(1), and 80DD. Some conditions are applicable to these plans. Such plans help people to save up to 1.5 lakh rupees in a year.

Q- Which investment scheme is best under 80C?

PPF (Public Provident Fund), EPF, Equity Linked Saving Schemes, SCSS, SSY, NSC, Infrastructure Bonds, Tax Saving FD, etc., are eligible investment schemes that come under section 80C deductions.

Q- Which LIC policy is best suited for 100% tax exemption?

LIC Jeevan Anand policy offers tax benefits under Section 80C and 10(10D). Therefore, you can claim tax exemption and other benefits associated with this policy.

Q- How to reduce my income tax?

There are some proven ways to reduce your payable income tax. For example, you can invest in any retirement savings plan, claim on employee HRA allowance, education loan, housing loan, medical expenses, etc., if any.

Q- How CA helps in reducing income tax legally?

Chartered accountants (CAs) are masters of the legal tax system. They help taxpayers to avail of tax exemptions and deductions by exposing the actual tax liabilities as per the Income Tax Act, 1961 of India at the time of their income tax return filing.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.