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Do you think that you’re paying too much tax? Have you ever thought about how you can save tax from your taxable income? We’re here to help!

As the financial year is coming to an end, every working individual has one thing in mind “how to save taxes on my hard-earned money?” If you plan your taxes well, you have a higher chance of saving rather than paying more than you should be. Investors in a hurry or the lack of knowledge regarding investment options make hasty decisions.

Saving tax is not as difficult as it sounds, there are so many ways that you never knew could easily help you. Read along as we guide you and discuss smarter ways of saving taxes and investment in this blog.

“Saving on taxes is smart. Saving on taxes with ELSS and NPS is smarter”

We are all aware of various investment options available under section 80C like PPF, NSC, ELSS and NPS etc but important is to choose an option that not only saves your taxes but also grew your wealth.

If you are looking for tax saving under section 80 C of the Income Tax Act 1961, in this financial year, the best tax saving investment options are Equity linked saving scheme (ELSS) and National Pension Scheme (NPS).Other than tax benefit, has the potential to build wealth as money is invested in equities.

An ELSS (Equity linked saving scheme) is mutual fund scheme that is eligible for tax deduction up to Rs 1.5 Lakh under section 80C of the Income-tax Act, 1961. ELSS funds equity Mutual Fund Schemes that invest in equities throughout the tenure. Equity linked saving scheme (ELSS) comes with a lock-in period of 3 years which is very less as compared to other tax saving options like PPF 15 years, NSC 5 years etc.

NPS or National Pension System is government-sponsored pension scheme that allows every individual whether employed or self-employed to invest under Sec 80 CCD (1) within the overall ceiling of Rs. 1.5 lac under Sec 80 CCE. NPS also qualifies for additional tax benefit of Rs 50,000 under Section 80CCD (1B).

Under Corporate Sector, Employer’s NPS contribution (for the benefit of employee) up to 10% of salary (Basic + DA) u/s 80CCD (2), is deductible from taxable income, without upper monetary limit.

Investor can withdraw from NPS only at the time of retirement at 60. Partial withdrawal is allowed after 3 years of NPS opening under specific conditions. Upto 60% of corpus withdrawn at the time of maturity is tax free, remaining is compulsory to invest in annuities and it is fully exempt from tax.

Investment in NPS can be done in two accounts –Tier 1 account and Tier 2 account. Tax benefit is available in Tier 1 account.

NPS offers two approaches to investment –Auto Choice and Active choice. In Active choice, investor selects the allocation percentage in assets classes, maximum of 75% can be invested in equities and rest in corporate bonds, government securities and alternative investment funds(AIF).

In Auto choice, funds are automatically allocated amongst asset classes in a pre-defined matrix, based on the age of the subscriber. Three options available with Auto choice – Aggressive, Moderate and Conservative. Investor can choose option according to its risk appetite.

Let’s have a look at NPS and ELSS return Returns

 NPS Scheme- Equity Return



Returns (%)
1 year 3 years 5 years
HDFC Pension Fund 15.46 11.74 8.87
Birla Sun Life Pension Scheme 13.47
ICICI Pru Pension Fund 14.20 10.51 7.83
LIC Pension Fund 11.33 8.78 6.57
SBI Pension Fund 12.73 10.33 8.03
UTI Retirement Solution 12.80 10.25 8.43
Kotak Pension Fund 15.39 10.21 8.07
Benchmark Return 14.38 11.68 8.47

 NPS Scheme-Corporate Bonds Return



Returns (%)
1 year 3 years 5 years
HDFC Pension Fund 15.27 8.35 9.92
Birla Sun Life Pension Scheme 15.21
ICICI Pru Pension Fund 14.94 8.5 10.28
LIC Pension Fund 15.01 7.89 9.66
SBI Pension Fund 14.85 8.27 9.78
UTI Retirement Solution 13.15 7.44 9.25
Kotak Pension Fund 13.49 7.53 9.51
Benchmark Return 14.86 7.77 9.60

NPS Scheme- Government Securities Return



Returns (%)
1 year 3 years 5 years
HDFC Pension Fund 17.35 7.86 10.08
Birla Sun Life Pension Scheme 17.15
ICICI Pru Pension Fund 16.76 7.79 10.15
LIC Pension Fund 19.63 9.63 11.15
SBI Pension Fund 17.38 8.02 10.32
UTI Retirement Solution 17.10 7.52 9.84
Kotak Pension Fund 17.79 7.85 10.26
Benchmark Return 17.69 7.53 9.79

*Return as on 29th November 2019. **Source-NPS Trust

ELSS Schemes Return



Returns (%)
1 year 3 years 5 years
Axis Long term Equity Fund(G) 15.21 16.29 11.38
Mirae Asset Tax Saver Fund(G) 14.08 17.65
Kotak Tax Saver(G) 12.96 12.22 9.28
DSP Tax Saver(G) 15.64 12.34 10.67
Benchmark Return 12.71 15.24 7.29

*return as on 30th November, 2019

The Bottom Line

 To utilize Sec 80C benefit, one should first go for ELSS for benefit of Rs. 1.5 Lakh and additional benefit of Rs. 50,000 should be taken from NPS.

ELSS is best for long term wealth creation, risk appetite should be considered before investing in it. NPS should be considered for building retirement corpus. However investment choices should not be made merely by tax savings. Investor before investing should take guidance of Arihant Financial Advisor and identify risk appetite, asset allocation and overall financial plan.


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