Not Just for Wealth Creation—These Government Schemes Can Also Help You Save Big on Taxes

Looking to build wealth while also saving on income tax? Certain government-backed investment schemes can help you do both. These plans are not only secure and regulated, but they also offer substantial tax benefits under Section 80C of the Income Tax Act—making them ideal choices for long-term financial planning.

Here’s a look at three top-performing government investment schemes that provide the dual advantage of tax savings and wealth creation—available under the old tax regime.

1. Public Provident Fund (PPF): A Long-Term, Tax-Free Investment

One of the most trusted and popular savings options in India, the Public Provident Fund (PPF) offers investors the benefit of compounded, tax-free returns with the security of a government-backed instrument.

• Tax Benefit: Investment up to ₹1.5 lakh annually qualifies for deduction under Section 80C.

• Interest Rate: Currently, PPF offers an interest rate of 7.1% per annum, compounded annually.

• Tenure: The lock-in period is 15 years, with options to extend in blocks of five years.

• Minimum Investment: Just ₹500 per year; maximum ₹1.5 lakh per year.

PPF is ideal for conservative investors who want stable returns over the long term while enjoying tax-free interest and maturity proceeds.

2. National Pension System (NPS): Your Retirement, Secured and Tax-Efficient

The National Pension System (NPS) is another highly regarded government scheme aimed at helping individuals build a retirement corpus.

• Tax Benefit: Contributions up to ₹1.5 lakh under Section 80C, plus an additional ₹50,000 under Section 80CCD(1B)—taking the total tax saving benefit to ₹2 lakh annually.

• Flexibility: Investors can start with as little as ₹1,000 per month.

• Returns: NPS returns range between 8–10%, depending on the asset allocation.

• Exit & Withdrawal: Partial withdrawals are allowed after 3 years under specific conditions; full exit permitted at age 60.

This scheme is particularly beneficial for salaried employees or self-employed individuals who wish to build long-term wealth while securing post-retirement income.

3. Sukanya Samriddhi Yojana (SSY): Financial Security for Your Daughter’s Future

Designed specifically for the girl child, Sukanya Samriddhi Yojana (SSY) is a government savings plan that not only offers high interest but also ensures long-term financial protection for a daughter’s education or marriage.

• Eligibility: Parents or legal guardians of a girl child under 10 years.

• Tax Benefit: Investment up to ₹1.5 lakh annually under Section 80C.

• Interest Rate: Currently among the highest for any small savings scheme—around 8.2% per annum.

• Tenure: Maturity period is 21 years or until the girl is married after the age of 18.

• Minimum Investment: Just ₹250 annually to keep the account active.

With E-E-E (Exempt-Exempt-Exempt) tax status, SSY offers tax-free deposits, interest, and maturity proceeds, making it a top choice for parents planning ahead.

Key Takeaway: Choose the Right Scheme Based on Your Goal

Each of these schemes caters to a different financial objective:

• Choose PPF if you're looking for long-term, tax-free returns with government backing.

• Go for NPS to build a robust retirement corpus with additional tax-saving opportunities.

• Pick SSY if you have a daughter and wish to secure her financial future with high returns and tax savings.

However, keep in mind that these benefits are available only under the old tax regime. If you’ve opted for the new tax regime, you won’t be eligible for Section 80C deductions, which significantly reduces the appeal of these instruments for tax purposes.

Final Words

Investing in government schemes is one of the safest ways to combine wealth accumulation with tax planning. Whether you’re saving for retirement, your daughter’s future, or simply building a financial cushion—PPF, NPS, and SSY offer structured, disciplined options to help you reach your financial goals. Just ensure you align these with your income tax regime and financial objectives for maximum benefit.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always consult a SEBI-registered financial advisor before making any investment decisions.