Want to save tax and get fixed returns?

With the stock market touching an all-time high, investors are looking at fixed return alternatives. 

Read on to understand fixed return investments that also give a tax benefit. 

Five year bank deposits

Five year bank deposits are the latest addition to Section 80C. For those of you who prefer depositing money in the local bank, this one is a real boon. Do remember, however, that any deposit with a tenure of less than five years will not be valid for the tax benefit.

What banks generally do is open a current account with that overdraft amount. You will have to pay interest only on the amount that you utilise.

As of now, you can expect around 8 per cent interest on a five year fixed deposit. Senior citizens will get 0.5 or 1 per cent more.

So, while this option scores high on convenience and safety, the hitch is that the interest earned on bank deposits is taxed.

Public Provident Fund This one has been the darling of the tax-saving instruments for decades. And not without reason. With an interest rate of 12 per cent, those who invested in it in the past would have reaped great returns. It dropped to 11 per cent, then 9.5 per cent and is now 8 per cent per annum.

National Savings Certificate On the face of it, this one is identical to PPF, but with a lower tenure. While NSC offers the same interest rate of 8 per cent per annum, it is computed on a half-yearly basis, while PPF is calculated on an annual basis. On this point, NSC scores.

Employee Provident Fund The EPF is a retirement benefit scheme available to salaried employees. Under this scheme, a stipulated amount decided by the government (currently 12 per cent) is deducted from the employee's salary and contributed towards the fund. The employer makes an equal contribution.

Infrastructure bonds At one time, it was mandatory to invest in them. And financial institutions like ICICI and IDBI garnered phenomenal amounts of money due to this stipulation. Now that the investor has the flexibility to bypass this investment, this is exactly what is being done. The financial institutions, too, have not been coming out with issues. more