5 smart tax-saving options with no long lock-ins

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Many traditional tax-saving tools, such as Public Provident Fund (PPF) or National Savings Certificates (NSC), come with long lock-in periods of five years or more. While they offer stable returns, they tie up your money for a significant duration. If you’re looking to reduce your tax outgo without losing access to your funds for years, several other smart options exist under Section 80C and beyond.

Tax-saving fixed deposits of 5-year maturity

Although technically for five-year lock-in, tax-saving fixed deposits are one of the shortest tenors for Section 80C. Offered by banks as well as the post office, they give back to you a guaranteed amount, typically between 6.5% to 7.5% annually in 2025. You cannot withdraw earlier than your time, but this investment does not force you to remain in this investment for more than five years either, unlike PPF or ULIPs.

ELSS funds provide lowest lock-in among Section 80C weapons

Equity Linked Saving Schemes (ELSS) are a category of mutual funds having the lowest lock-in period of just three years—lowest of all investments under Section 80C. Return is market-linked and, historically, better than other offerings, without being guaranteed. Since there is a lower holding period and a possibility of better returns, ELSS is highly popular among young taxpayers who are ready to take a minimal amount of risk for tax effectiveness.

Health insurance premium under Section 80D

Buying health cover for yourself or your family can save you on tax under Section 80D. You can claim premiums for self and family up to ₹25,000 and an additional ₹25,000 if you also cover your parents (₹50,000 if your parents are senior citizens). No lock-in—renew each year and claim tax benefit if you keep paying premium.

National Pension System (NPS) partial withdrawals

Though NPS is a long-term retirement tool, it is available in part withdrawal after three years of continuous contribution for specified purposes like education, marriage, or purchasing a home. You can also enjoy the relief of ₹50,000 under Section 80CCD(1B) over and above the ₹1.5 lakh exemption limit of Section 80C. It offers tax relief now and builds retirement corpus for tomorrow.

EPF contributions (for salaried employees)

If you are a salaried employee, your contribution to the Employee Provident Fund (EPF) is eligible for deduction under Section 80C automatically. Although the withdrawal period for EPF is longer (up to retirement or change of job), you can take partial withdrawals after five years in case of unexpected circumstances like payment of home loan or medical expenses. Since the contribution is automatic and mandatory, you are saving hard unconsciously.

Combine temporary relief from taxation with longer-term objectives

You may not need to compromise on liquidity for tax saving. A judicious blend of short-term sources like ELSS or health insurance and judicious use of compulsion plans like EPF and NPS can be an effective tax strategy that addresses both immediate needs and long-term goals.

Always match your tax-saving vehicles to your investment time horizon and risk tolerance for maximum yield.