6 Best government investment schemes for tax exemption – Tax saving investments with tax exempted return benefit for 2025

Best Tax Free Return Investment in India 2025

In today’s world, where a single source of income is not sufficient to fulfill big dreams, there is an ardent need to invest money in profitable ventures. However, with profit does come the fear to pay the tax. So, why not look for those Investment schemes in India that offer great returns with tax exemptions? At present, in India, we have several investment schemes, but investing in tax-free schemes is like icing on the cake. The Government of India understands the dilemma of a common man, who hesitates to pay the tax due to limited income, so it has introduced several investment schemes in India with tax-free returns.

Here we are eager to help you invest your hard-earned money in the best investment schemes in India. All these offer you the much-desired tax-exempt benefits and much more, so read on!

Why Invest in Investment Schemes in India?

Before throwing light on the best government schemes to invest money in India, we want you to know the reasons to invest your idle money. Small investments done at the right time may reap big returns to meet your financial needs. Although there are many options to invest money, to get an edge over the other schemes, one must look for government schemes with tax-exempt benefits. None of us wants to pay the tax, and whatever tax we pay, there is always a lookout for a way to get a tax exemption benefit as per the Income Tax Act, 1961. Investing in government schemes is a safe and secure method to invest money for tax-free returns.

What are Tax-Saving Investments?

You just read about the importance of investing in investment schemes in India. It is now time to understand the benefits of investing in a tax-free investment. Tax-saving investments are well-structured plans that offer lucrative interests on your deposits without burdening you with tax burdens. They exempt you from paying tax either on the premium payment or on the maturity amount, and sometimes on both. As per Section 80 C of the Income Tax Act, 1961, several investment schemes in India offer tax deductions for investments up to Rs. 1,50,000 deposit per annum.

#1. Life Insurance Policy:

The first scheme to invest money is like a two-in-one platform that helps you to enjoy term insurance benefits exempted income tax and safeguard your family’s financial needs in case of an unfortunate event of your untimely death. According to Sections 10 and 10 D of the Income Tax Act, a policyholder of a life insurance policy is exempted from paying tax on the death benefit, survival benefit, and maturity benefit of these policies.

#2. PPF or Public Provident Fund:

Nothing comes close to the Public Provident Fund or PPF when it comes to investing money with eligibility to enjoy tax deductions under section 80C of the Income Tax Act, 1961. You are allowed to deposit from a minimum of Rs. 500 to Rs. 1,50,000 in a year in your PPF account and enjoy tax-free returns. With a duration of 15 years, a PPF account can be extended as per wish for up to 5 more years.

#3. ULIP or United Linked Insurance Plans:

Third interesting investment scheme with tax-free returns is the ULIP or United Linked Insurance Plan. This is a wealth-building single investment plan. With a ULIP you can invest in a mutual fund, bond, or even a stock. The best thing about a ULIP is that the premium payment paid for it is subjected to tax deduction under Section 80 C of the Income Tax Act, 1961. Moreover, the returns of the policy at the time of maturity are also tax-free under Sections 10 and 10(D) of the Income Tax Act, 1961.

#4. ELSS or Equity Linked Saving Scheme:

Also known as an equity mutual fund, an ELSS or Equity Linked Savings Scheme allows you to invest about 80% of the total amount in equity and other equity-related schemes. Money invested in an ELSS is blocked in a lock-in period of 3 years when you can’t withdraw the amount. ELSS is one of the best investment schemes in India with tax-free returns, as it is exempted from tax under Section 80C of the Income Tax Act, 1961.

#5. Sukanya Samriddhi Yojana:

Save for your girl child right now with the beneficial Sukanya Samriddhi Yojana. Counted as one of the best tax-free investment plans with an amazing interest rate of 8.1%, this scheme offers tax-free returns under Section 80 C of the Income Tax Act. Give your daughter the wings to fly without any financial restraints by investing early in the Sukanya Samriddhi Yojana which allows you to deposit a maximum of Rs. 1,50,000 in a year.

#6. Tax Saving Fixed Deposit:

You must have invested money in fixed deposits, but what about investing in tax-saving fixed deposits? With a lock-in period of around 5 years, a tax-saving fixed deposit is an amazing way to enjoy tax exemptions under Section 80 C. The only con of such a scheme is that it doesn’t allow you to withdraw money during the lock-in period.