Top ELSS Mutual Funds and Other Tax Saving Investments in India 2025

Saving tax is a smart way to manage personal finances, and Section 80C of the Income Tax Act remains one of the most popular avenues for doing so in India. A sum of ₹1.5 lakh is the maximum amount of money on which individuals can claim deductions made from investments and expenses that are eligible under Section 80C. This benefit is applicable only to taxpayers who opt for the old tax regime. This blog explores the tax-saving investment choices under Section 80C to extract the highest advantage and for wealth building. Continue exploring for detailed insights.

What is Section 80C?

Section 80C of the Income Tax Act enables Indian taxpayers to reduce their taxable income by availing deductions on specified eligible investments and expenses. This helps individuals reduce the overall tax they need to pay within specified limits. This benefit applies exclusively to individual taxpayers and Hindu Undivided Families (HUFs) who opt for the old tax system. People liable to pay taxes can, under Section 80C, make their tax liability zero by investing in the instruments approved up to the limit of ₹1.5 lakh in one financial year. The eligible investments and expenses include payment of life insurance premiums, contributions to the provident fund, fixed deposits, tuition fees and some other savings schemes, etc.

Benefits of Investing Under Section 80C

Section 80C investments are the money-saving decisions that an individual can take to gain better financial control. Among the main benefits, one can list the following:

• Lowering the taxable income means that the tax amount paid will be less.
• By pairing tax savings with the potential for the growth of one’s long-term wealth.
• Encouraging the habit of disciplined savings that becomes a source of financial stability.
• Assisting in long-term financial planning and increasing the feeling of financial security.
• Adding more benefits, such as the possibility of loan repayment and insurance coverage.

 Best tax-saving investments in India under 80C 2025

Equity-Linked Savings Scheme (ELSS)

Equity-Linked Savings Scheme (ELSS) remains a favored option for Indian investors aiming to reduce their tax liability under Section 80C, offering potential growth through investments in the equity market. The returns from ELSS mutual funds are linked to the market, so the fund’s value can fluctuate depending on the stock market and thus, the performance can vary every year. Investing in ELSS mutual funds is eligible for tax deductions up to ₹1.5 lakhs in a financial year, and long-term capital gains in excess of ₹1 lakh attract a 10% tax rate. The plan is meant for those who want to save tax as well as make money from the stock market.

Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a savings programme backed by the government, offering tax advantages under Section 80C of the Income Tax Act. It gives a certain amount of interest, which is determined by the government and normally changed every three months; as of August 2025, the PPF rate of interest is 7.1% per annum. 

The PPF has a pledge period of 15 years, and a limited withdrawal is allowed only after five years have elapsed under some specific conditions. Deposits made into PPF qualify for tax relief of up to ₹1.5 lakh per financial year. Both the interest earned and the maturity proceeds are fully exempt from taxation. Because of its security and appealing tax benefits, the PPF still holds a high rank among savings instruments for the long term and pension planning.

Employee Provident Fund (EPF) / Voluntary Provident Fund (VPF)

The Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF) serve as long-term savings plans primarily designed for employees. In the Employee Provident Fund, the employee as well as the employer put in a set percentage of the worker’s basic salary and dearness allowance per month. This money is then accumulated with interest to form a retirement corpus. The present rate of interest on EPF is 8.25% per annum as of the year 2025.

The Voluntary Provident Fund (VPF) scheme allows employees to voluntarily contribute more than the minimum prescribed under EPF, earning the same interest rate. Withdrawals from EPF and VPF accounts are allowed in a few situations, i.e., retirement or unemployment, subject to certain conditions. Both schemes allow the investor tax benefits. The investments made in the schemes and the interest income thereon are exempted from tax, thereby making them an important instrument for retirement planning and savings for the long run.

National Savings Certificate (NSC)

The National Savings Certificate (NSC) is a government-supported fixed-income investment scheme in India, commonly offered at post offices. As of August 2025, NSC gives an interest rate of 7.7% per annum, compounded annually, and the interest gets paid at maturity. This scheme holds a five-year lock-in period, and a premature withdrawal is only allowed in a few occurrences, such as the death of the investor.

An investor can take the initiative with ₹1,000, and there is no top limit for the investment; however, only ₹1.5 lakh per annum is eligible for the Section 80C tax deduction. The interest earned from the National Savings Certificate (NSC) is liable to taxation according to the investor’s income tax slab. Still, the yearly accrued interest (which is automatically reinvested) allows the investor to claim a deduction under Section 80C. NRIs and other non-individual entities are not eligible for NSC.   

Life Insurance Premiums

Life insurance premiums are periodic payments required to keep a policy active, providing financial security to beneficiaries upon the policyholder’s death. Premiums paid for qualifying life insurance policies are eligible for tax deductions under Section 80C of the Income Tax Act, with a maximum limit of ₹1.5 lakh per financial year, applicable exclusively to those who opt for the old tax regime. Generally, the amounts paid as maturities and death benefits from these policies are exempt from taxes, provided certain conditions are met. Besides, life insurance premiums are liable to an 18% Goods and Services Tax (GST), which is a factor affecting the total cost of policies. Life insurance can be a tool for covering your risks as well as for saving or investing with the help of the company.

5-Year Fixed Deposit (FD) with Banks

A 5-Year Fixed Deposit (FD) with banks is an investment for those who want to have a specified period of time with a guaranteed return. The money is invested for five years, and the bank pays interest at a rate which is decided in advance, and it usually ranges from 6% to 7% per annum in 2025; however, it varies from bank to bank. 

The amount that you invest will be eligible for a tax benefit of up to ₹1.5 lakh per annum under Section 80C. But the interest will be added to the total income and taxed as per the income tax slab of the investor. If the deposit is withdrawn before the end of the term, then the depositor may not only receive a lower rate of interest but also be charged a penalty. 

Fixed deposits are a combination of safety of capital and regular returns, which is why they can attract risk-averse investors who are after security and stable income for the next few years.

Senior Citizens Savings Scheme (SCSS)

The Senior Citizens Savings Scheme (SCSS) is a government-supported savings program tailored to meet the financial needs of senior citizens. This scheme is accessible to individuals who are 60 years of age or above. The scheme is offered for a duration of five years and can be extended by an additional three years if desired. The amount of deposit may be as low as ₹1,000, and the maximum amount can be up to ₹30 lakh. As of 2025, SCSS gives an interest rate of 8.2% per annum, with the interest paid out every quarter.

The plan guarantees a steady income to the investor and can be accessed through banks and post offices, which are authorised. Although the investments are eligible for deductions from income tax under Section 80C up to ₹1.5 lakh, the interest is earned and is taxable as per the individual’s income tax slab and may be deducted at source if it exceeds ₹50,000 annually. Facilities like nomination and joint accounts help senior citizens to have more control over their retirement savings and thus make it more convenient.

Sukanya Samriddhi Yojana (SSY)

The Sukanya Samriddhi Yojana (SSY) is a government-supported savings program aimed at providing financial security and support for the education and marriage of girl children in India. An account can be opened at an authorized bank or post office by a parent or guardian for a girl child who is below 10 years of age. It enables investments with flexible options and has a minimum deposit of ₹250 and a maximum deposit limit of ₹1.5 lakh per financial year. 

For the period from July to September 2025, the Sukanya Samriddhi Yojana (SSY) offers an annual interest rate of 8.2%, compounded yearly. The account reaches maturity 21 years after its opening or upon the marriage of the holder, provided they are at least 18 years old at that time. Additionally, the scheme is structured for a term of 5 years, with a possibility to extend it by another 3 years. After the girl attains 18 years of age, the account holder is allowed to withdraw up to half of the account balance to support expenses such as higher education or marriage.

The interest earned along with the maturity amount is absolutely free from taxes, and contributions to SSY get an exemption from the taxable income under Section 80C of the Income Tax Act up to ₹1.5 lakh per year. 

Comparative Overview of Major Tax-Saving Investment Options 

Investment Option	Lock-in Period	Expected Returns	Risk Level	Tax Rates on Earnings
Equity-Linked Savings Scheme (ELSS)	3 years	Market-linked	Moderate to High	Long-term capital gains above ₹1 lakh in a financial year are taxed at a rate of 10%.
Public Provident Fund (PPF)	15 years (Partial withdrawals are permitted once the account has completed 5 years)	7-8%	Low	Interest earned is completely tax-free
Employee Provident Fund (EPF) / Voluntary Provident Fund (VPF)	Till retirement	8.25%	Low	The earnings from interest are fully exempt from taxation.
National Savings Certificate (NSC)	5 years	7.7%	Low	Interest earned is taxable at individual’s slab rate
Life Insurance Premiums	Policy term dependent (usually 5 years minimum)	Varies by plan	Low to Moderate	Maturity proceeds are usually tax-free
5-Year Fixed Deposit (FD) with Banks	5 years	6-7%	Low	Interest earned is taxed as per the individual’s income tax slab.
Senior Citizens Savings Scheme (SCSS)	5 years	8.2%	Low	Interest earned is taxed as per the individual’s income tax slab.
Sukanya Samriddhi Yojana (SSY)	21 years	8.2%	Low	Interest earned is completely tax-free

 

Common Mistakes to Avoid 

It is necessary to avoid typical mistakes that are often made when one is taking care of tax-saving investments. These errors may be:

• Not paying attention to the lock-in periods can affect liquidity and access to funds.
• An investor who goes for investments without having a clear understanding of the risks involved is likely to end up making an unsuitable choice of investment.
• Delaying the start of investments reduces the benefits of compounding and tax savings.
• Ignoring individual financial goals for investments may lead to an investment pattern that is not in line with your portfolio.
• The result of not updating the list of nominees or not having the correct documentation is the occurrence of difficulties in claim processes.

 

Conclusion 

Section 80C gives Indian taxpayers a method to lower their taxable income by investing in approved schemes and instruments. Public Provident Fund, Employee Provident Fund, National Saving Certificate, etc., are some of the options that come with different features, benefits, and tax implications, which individuals can use for their financial goal alignment. Proper use of these instruments may result in the creation of wealth, the deepening of financial security and the management of taxes effectively. Enhance your investment strategy by exploring platforms that provide in-depth performance insights, expert advice, and personalised recommendations.