Public Provident Fund: The PPF will be the first choice as a tax saver as it scores well on almost all parameters. When Fixed Deposits (FD) compared with PPF, the maturity and tax on the interest earned is exempted in PPF. PPF investors will be provided with more options like opening new account in a post office branch or a bank, doing self paperwork without any agent’s help, periodicity and quantum of investment, liquidity, withdrawal of money (not beyond 50 percent of balance) after five years and flexibility to take loans. In addition, some of the banks will also provide online investments. The PPF can be useful for risk-averse investors, self-employed professionals and those who are not covered by the Employees Provident Fund and other retrial benefits.

National Savings Certificate and Bank FDs: Many investors have misconceptions about bank fixed deposits.

Most often they think that up to 10,000 interest from bank deposits is tax-free, but this is not true. The newly introduced Section 80TTA gives a deduction of up to 10,000 on interest earned in the savings bank account, but not on fixed deposits and recurring deposits, it means that if you have an average balance of 2.5 lakh in your savings account during a financial year the interest would be tax free. Also, the nomenclature 'tax-saving deposits' means you save tax under Section 80C, not that these deposits are tax-free. The interest earned on deposits is fully taxable at the normal tax rate applicable to you. You have to mention this interest under the head 'Income from other sources' in your income tax return.

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