What are the various tax saving opportunities in investment. Like Arbitrage funds in place of FD, tax harvesting. Any interesting ideas and options?
Tax-Saving Investments for Better Returns
Can Arbitrage Funds Replace Fixed Deposits (FDs)?
Arbitrage funds aim to earn returns from market price differences.
- Taxed as equity funds
- Lower tax on long-term gains
- Often more efficient than FDs for investors in higher tax slabs
- Better liquidity than traditional FDs
FDs are fully taxed at your slab rate, so arbitrage funds may offer higher post-tax returns.
What Is Tax Harvesting?
Tax harvesting helps reduce capital gains tax.
- Sell investments showing a loss
- Use the loss to offset gains
- Reinvest again to maintain your portfolio
It works well with mutual funds and stocks.
Popular Section 80C Options
You can claim up to ₹1.5 lakh deduction.
- ELSS Funds (3-year lock-in)
- PPF (15-year maturity)
- NPS (long-term retirement savings)
- Life insurance premiums
- Tax-saving fixed deposits
How NPS Gives Extra Tax Benefits?
Over and above 80C:
- Extra ₹50,000 deduction under Section 80CCD(1B)
This helps reduce taxable income directly.
Tax-Free Income Options
Looking for zero tax on returns?
- PPF interest is tax-free
- EPF interest (within limits) is tax-free
- Sovereign Gold Bonds (SGB) capital gains are tax-free after 8 years
Use Health Insurance for Tax Savings
Medical insurance gives tax deductions under Section 80D.
- For self and family
- Extra benefit for parents’ policy
Smart Ideas for Tax-Efficient Investing
- Use equity funds for long-term gains
- Mix PPF + ELSS for balanced growth
- Use SGB instead of physical gold
- Save through NPS for retirement + tax benefits
- Prefer arbitrage funds over FDs for better tax efficiency
Small optimisations can reduce tax significantly when done consistently.
Thanks. Any other methods which most of the common investors are not aware of.