Best Tax saving Investment option for Salaried employee

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Best Tax saving Investment option for Salaried employee

Tax saving

Tax saving or investment planning is one of the biggest pain point in everyone’s pocket. We all are worried about tax saving and which investment scheme to invest to ensure maximum benefit in tax benefit and return.

Being a salaried employee with limited source of income, what would be the best option to choose and make your investments to save maximum tax with good return? If I check on internet, the internet will provide the analytical view and would explain me the relationship between risk and return. So again the question falls on me which investment scheme is better for me. There is no one correct option or answer to the question. But still I will try to answer the most haunting question and try to justify it with my own analysis.

I myself being a salaried person, I understand what many individual go through to decide their investment options.

Investment scheme options available:

  • Public Provident Fund
  • Fixed deposits
  • National Saving Certificate
  • National Pension Scheme
  • Equity Linked Saving Scheme (ELSS)


  • Investments like National Pension Scheme (which has a lock in period up to years till the individual attains 60 years) or Provident Fund scheme (which has a lock-in period of 15 years) has a very long lock-in period is not preferable option. After taking into consideration risk attached to all the options and understanding that being an individual with limited money we cannot keep such amount of investment invested and locked in for a period of 15 years or so.
  • Also investments like Fixed Deposit and National Saving Certificate have a shorter holding period but lately the rate of return has been dwindling. This descending rate of return makes this option not very attractive.
  • Thus after going through all ifs and buts, I would opt for ELSS option.

    What is Equity Linked Saving Scheme (ELSS)?

    Under this scheme, an individual invests his or her fund under tax-saving mutual fund units. ELSS funds have an overall lock-in period of 3 years. A few top selling ELSS funds in market are: ICICI Prudential Tax Plan, Birla Sun Life Tax Relief 96 and Axis Long Term Equity. The ELSS plans were issued with 2 options to choose from: the growth and dividend option. In the growth option of ELSS, the mutual fund scheme gives the accumulated value of your investment at the time of maturity. Whereas, the dividend option of the ELSS shares some profit with the investors in the form of dividend on regular basis.-

    Thus, apart from having the shortest holding period of 3 years and attractive return policy, the rate of returns in the past 5 years have proved to be 10% and above.

    Also in line with the current political position and market condition, it seems the market trend would be up and growing which would be favorable for the growth of ELSS investments.

    And with that optimism and believe I will vote and invest this year in ELSS.

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