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Not all savings and investment options that are available for us are tax-free when returns are paid.
Further, tax-saving is not same as tax-free returns.
For example, some classical tax-saving instruments such as NSC, SCSS, 5-year time deposits in bank and post office are not really great when it comes to getting tax-free returns. In fact, the interest amount from these sources gets added to one's income and hence is liable to be entirely taxable.
Instead of earning and paying tax, it would be sometimes wise to focus on earning tax-free returns.
Some interesting tax-saving as well as tax-free financial instruments are:
- Equity-Linked Savings Scheme (ELSS)
- Public Provident Fund (PPF)
- Employee Provident Fund (EPF)
- Unit-Linked Insurance Plan (ULIP)
- Traditional Insurance Plans
- Sukanya Samriddhi Yojna (SSY)
Study each of the product well before you begin investing in it.