We all need to plan for the future and save our finances. Tax planning is one of the safest methods of [financial planning](https://pensionbox.in/blog/Taking-care-of-your-financial-wellness-in-2022). To have a dual benefit of meeting your financial goals and saving tax, effective tax planning is necessary.

Financial planning is crucial for a happy life and peace in life. If you are not worried about your finances and taxes you sleep with peace. Here we guide you on how to achieve maximum tax benefits and very effective financial planning.

## What are the instruments and sections for tax saving?

Tax saving is a crucial step in financial planning, therefore it is very necessary to know about the instruments that help in saving tax. 

### Here are the instruments that help in tax saving.

**1. Fixed Deposit** 

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[Fixed deposits](https://pensionbox.in/product/fd) are one of the most popular instruments of tax saving. It gives tax benefits under section 80C of the Indian Income Tax Department. The deduction amount that can be claimed by the individuals is 1.5 lakhs if they invest in a tax-saver fixed deposit. The lock-in period for such a fixed deposit is five years and the interest earned is taxable. The rate of interest usually ranges from 5.5% to 7.75%.

**2. PPF (Public Provident Fund)**

<img src="https://pensionbox-public-bucket.s3.ap-south-1.amazonaws.com/BlogInnerImages/Frame+1171275657.png" width="100%"></img>

Another popular tax-saving instrument is the [Public Provident Fund](https://pensionbox.in/product/ppf). Individuals who are looking for a long-term savings cum investment product, need to open a pdf account. Individuals who contribute to PPF can claim a guaranteed rate of interest. One can claim deductions under Section 80C up to Rs. 1.5 lakhs in a financial year on these deposits.

**3. ULIP (Unit Linked Insurance Plan)**

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[Unit Linked Insurance Plans or ULIPs](https://www.investopedia.com/terms/u/unit-linked-insurance-plan.asp) are long-term investment planning instruments. ULIPs allow individuals to choose equity funds, debt funds, or both. Individuals get the flexibility to switch between funds in sync with their financial goals. If you invest in ULIPs you can save taxes under section 80 C and 10 (D) of the Income Tax Act, 1961.

**4. National saving certificate**

<img src="https://pensionbox-public-bucket.s3.ap-south-1.amazonaws.com/BlogInnerImages/Frame+1171275660.png" width="100%"></img>

The best investment tool for small to mid-investors is the [National Saving Certificate](https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=90). These are bond schemes that encourage small and mid investors for long-term investment. Individuals who have a savings bank account or an account with a post office can buy NSC. NSC certificates are also available in e-mode. Those who use net banking can easily get e-NSC. You can buy NSC from an investor or by yourself. NSC can also be purchased for a minor. Only an adult must buy it on behalf of minors as a joint account.

**5. Senior Citizen Savings Scheme**

<img src="https://pensionbox-public-bucket.s3.ap-south-1.amazonaws.com/Frame+1171275661+(1).png" width="100%"></img>

As the name suggests this is the best savings instrument for senior citizens i.e. for people above 60. This scheme gives a steady and secure source of income for their post-retirement. It also offers substantial returns.

It gives a major tax benefit on the amount deposited in a [SCSS account](https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=62). Individuals get this tax benefit under Section 80C of the Income Tax Act, of 1961. However, this tax exemption of up to rupees 1.5 lakhs is possible only under the 1961 scheme rather than under the new scheme of 2020.

**6. Life Insurance**

<img src="https://pensionbox-public-bucket.s3.ap-south-1.amazonaws.com/Frame+1171275662.png" width="100%"></img>

The easiest of all tax-saving instruments is insurance. It plays an important role in every individual's financial planning. [Life insurance](https://licindia.in/) provides both security to oneself and their loved one and also as a tax-saving instrument. Therefore it's the responsibility of a perennial income-earning person to take a life insurance plan.

Life insurance gives tax benefits irrespective of its type i.e. it may be traditional or market-linked (ULIP).

Life insurance plans are of various types but they all provide tax benefits.

According to section 80 C of the Income Tax Premium paid towards life insurance is exempted up to 1.5 lakhs.

Section 10 States that the proceeds on death/maturity are tax-free. In case of termination within five years deductions are claimed and taxed.

**7. Pension plans**

<img src="https://pensionbox-public-bucket.s3.ap-south-1.amazonaws.com/Frame+1171275663.png" width="100%"></img>

It is also a form of life insurance. The objective of this plan is different from the endowment plan and term plans which are called protection plans. Protection plans give financial security in the death of a person, however, pension plans give financial security when the person lives on.

Those who contribute to [pension plans](https://pensionbox.in/) get a tax deduction of Rs 1.5 lakhs under 80CCC (sub-section of 80C) of the Income Tax Act.

**8. Health insurance or Mediclaim**

<img src="https://pensionbox-public-bucket.s3.ap-south-1.amazonaws.com/Frame+1171275664.png" width="100%"></img>

If you want a financial instrument that covers all the accident/ illness/ hospitalization expenses, health insurance is the best. It offers tax benefits under section 80 D. Individuals can get tax benefits up to Rs 20 for senior citizens and 15000 for normal individuals. Moreover, the maturity value is tax-free when received Under Critical illness insurance policies.

Thus, we can see that many financial instruments can help in tax saving. Therefore, one must educate oneself on the available instruments and tax-saving methods. One way of enhancing your knowledge and being updated is via blogs. This helps in better financial planning. Stay tuned to [PensionBox](https://pensionbox.in/) for more such updates.

We all need to plan for the future and save our finances. Tax planning is one of the safest methods of financial planning. To have a dual benefit of meeting your financial goals and saving tax, effective tax planning is necessary.

Tax-Efficient Investment Strategies for Long-Term Savings

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