If you are a risk-averse investor, do not put your money into every tax-saving option you see.
In recent years, there was debate about whether the Old Tax Regime (OTR) would be removed. This happened because around 88% of individual taxpayers moved to the New Tax Regime, which is now the default. Only about 12% continue to choose the OTR.
After the Union Budget 2026, the Chairman of the Central Board of Direct Taxes confirmed that the Old Tax Regime will continue. The government is not planning to remove it.
The OTR works well for people who:
- Earn ₹25 lakh or more per year
- Pay home loan EMIs
- Pay house rent and claim HRA
- Pay life and health insurance premiums
- Pay interest on education loans (for self, spouse, children, or legal ward)
- Pay children’s tuition or hostel fees
- Make regular tax-saving investments
If your total deductions cross ₹8 lakh in a financial year, the OTR may be beneficial.
Under the new Income Tax Act 2025 (effective from 1 April 2026), exemption limits have increased. These include higher limits for children’s education allowance, hostel allowance, meal allowance, motor car perquisite, and more cities qualifying for 50% HRA exemption. Because of this, the OTR may now offer better take-home pay, especially for salaried individuals.
If you choose the OTR and prefer low risk, you must carefully select tax-saving options from the many choices available.
Who Is a Risk-Averse Investor?
Before looking at tax-saving options, let us understand what “risk-averse” means.
A risk-averse person usually:
- Focuses on protecting capital
- Avoids taking high risks
- Prefers fixed and predictable returns
- Is near retirement or already retired
- Has built assets but now prefers safety
- Does not have a regular income
- Has limited assets
- Supports dependent family members
- Has short-term financial goals
If these points describe you, you are likely a risk-averse investor.
Below are tax-saving investments that can help you claim up to ₹1.5 lakh deduction under Section 80C in a financial year.
Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a long-term savings scheme backed by the Government of India under the PPF Act, 1968. It helps you save tax and build funds for long-term goals like retirement, your child’s education, or marriage.
Even if you already contribute to an EPF account, opening a PPF account can help you build a larger retirement corpus.
You can also open a PPF account in your minor child’s name. As a guardian, you can claim the Section 80C deduction (up to ₹1.5 lakh).
Key features:
- Only one PPF account per individual
- Joint accounts are not allowed
- Tenure: 15 years
- Interest rate: 7.1% per year (compounded annually)
- EEE status (investment, interest, and maturity are tax-free)
- Minimum investment: ₹500 per year
- Maximum investment: ₹1.5 lakh per year
- Investment allowed in lump sum or up to 12 installments
To keep the account active and grow your savings, invest regularly.
The interest rate has remained unchanged since April 2020, even after RBI rate cuts. This protects small savers.
If investing monthly, deposit before the 5th of each month. Interest is calculated on the lowest balance between the 5th and the last day of the month.
Another benefit: your PPF account cannot be attached by court order for debt recovery. Your savings remain protected.
5-Year Tax-Saver Fixed Deposits
Many banks and India Post offer 5-year tax-saver fixed deposits.
Interest rates vary by bank. For example:
- State Bank of India: around 6.05% (general citizens)
- HDFC Bank: around 6.40%
- Senior citizens usually get 0.50% extra
Interest is compounded quarterly in banks. You can choose:
- Reinvestment option
- Quarterly payout
- Monthly payout
In India Post’s 5-year National Savings Time Deposit (NSTD), interest is paid annually.
Key details:
- Minimum investment: ₹100 (banks), ₹1,000 (India Post)
- No maximum investment limit
- Section 80C deduction limited to ₹1.5 lakh
- Deposits insured up to ₹5 lakh per bank by DICGC
- Can be held singly or jointly
- Tax benefit available only to the first holder
Interest earned is taxable as per your income slab. TDS applies under Section 194A.
These FDs have a 5-year lock-in. You cannot withdraw early. While this supports disciplined savings, consider your liquidity needs before investing.
National Savings Certificate (NSC) – VIII Issue
The NSC is a government-backed small savings scheme suitable for conservative investors.
Key features:
- Tenure: 5 years
- Minimum investment: ₹100 (in multiples of ₹100)
- No upper limit
- Can be held singly, jointly, or for a minor
- Interest rate: 7.7% per year (compounded annually)
Interest for the first four years qualifies for Section 80C deduction because it is reinvested. In the fifth year, interest is paid out and does not qualify for deduction.
Interest income is taxable as per your income slab and subject to TDS under Section 194A.
Premature closure is allowed only in specific cases, such as the death of the holder.
Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana (SSY) was launched in 2015 under the Beti Bachao, Beti Padhao campaign. It helps parents save for their daughter’s education and marriage.
Key rules:
- Open for a girl child between birth and 10 years
- Only one account per girl child
- Maximum two accounts per family (except twins/triplets)
- Minimum deposit: ₹250 per year
- Maximum deposit: ₹1.5 lakh per year
- Contributions required for 15 years
- Account matures after 21 years
Current interest rate: 8.2% per year.
It also enjoys EEE status.
Partial withdrawal (up to 50%) is allowed after the girl turns 18 for higher education.
If the girl marries after 18, the account closes. If she becomes an NRI, authorities must be informed within one month.
SSY is one of the most tax-efficient options for securing your daughter’s future.
Senior Citizens’ Savings Scheme (SCSS)
The Senior Citizens’ Savings Scheme (SCSS) is ideal for retirees.
Eligibility:
- Individuals aged 60 and above
- Individuals aged 55+ who retired under a voluntary retirement scheme
Key features:
- Minimum investment: ₹1,000
- Maximum total investment: ₹30 lakh
- Multiple accounts allowed
- Tenure: 5 years
- Interest rate: 8.2% per year
- Interest paid quarterly
Investment qualifies for Section 80C deduction (up to ₹1.5 lakh in the year of investment).
Premature withdrawal is allowed once, though conditions apply.
Interest earned is taxable and subject to TDS. However, withdrawals after August 29, 2024, are tax-exempt. At maturity, no tax applies on the principal, as interest was taxed during the tenure.
For managing retirement income, SCSS is a strong and stable option.
Choose Wisely for Effective Tax Planning
There are many tax-saving options available. But you must choose based on:
- Your risk appetite
- Your financial goals
- Your time horizon
- Your liquidity needs
Do not invest randomly just to save tax. Smart tax planning means selecting options that match your life stage and financial needs.
A rupee legally saved in tax is a rupee earned.
Happy tax planning and investing!
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