PPF, ELSS, NPS, insurance, home loan — a ranked comparison of every legal way to save tax in India, with real numbers for FY 2026-27.
If you earn a salary in India, roughly 20-30% of your income goes to income tax. The government gives you legal ways to reduce that bill — but most people pick the wrong ones, mix them badly, or miss the ones outside Section 80C entirely.
Here is every meaningful tax-saving investment available to a salaried Indian in FY 2026-27, ranked honestly on three things: actual returns, real risk, and how much tax you genuinely save.
The 80C bucket — you probably know these
Section 80C lets you deduct up to Rs 1,50,000 from your taxable income. That saves you Rs 31,200 if you are in the 20% bracket (plus 4% cess). But different 80C instruments are not the same — here they are, ranked.
### 1. ELSS (Equity Linked Saving Scheme)
Deduction: Up to Rs 1,50,000 under 80C. Lock-in: 3 years (shortest of all 80C options). Returns: Market-linked, historically 10-14% over 7-10 years.
ELSS is the only 80C option that invests in equities. It has the highest return potential and the shortest lock-in among 80C products. The downside: returns are not guaranteed. A bad market year can leave your 3-year return flat or negative. But over any 7-year rolling period, top ELSS funds have averaged 12%+ — well ahead of PPF or FD.
Who it is for: anyone under 45 who can stomach volatility for higher long-term returns.
### 2. PPF (Public Provident Fund)
Deduction: Up to Rs 1,50,000 under 80C. Lock-in: 15 years (partial withdrawal from year 7). Returns: 7.1% p.a. (Q1 FY 2026-27, set quarterly by government), fully tax-free at maturity.
PPF is the safest 80C option backed by sovereign guarantee. Interest is compounded annually. The best part: maturity proceeds are fully exempt from tax (EEE status — exempt on contribution, accumulation, and withdrawal). No other 80C option gives you all three.
The trade-off is the lock-in: 15 years is long, and while partial withdrawals are allowed from year 7, the limits are strict (50% of balance at end of year 4 or year immediately preceding withdrawal, whichever is lower).
Who it is for: conservative investors, anyone seeking a tax-free debt component in their portfolio, parents opening accounts for minor children.
### 3. NPS (National Pension System) — extra Rs 50,000 under 80CCD(1B)
Deduction: Up to Rs 1,50,000 under 80C + additional Rs 50,000 under 80CCD(1B) = total Rs 2,00,000. This is the *only* deduction above the 80C limit for most salaried individuals.
Lock-in: Till age 60. At maturity, 60% can be withdrawn tax-free as a lump sum; 40% must be used to buy an annuity (monthly pension), which is taxable as income.
NPS is unique because the extra Rs 50,000 under 80CCD(1B) sits on *top* of your 80C limit. If you have already exhausted 80C, NPS still gives you a fresh deduction. At the 30% bracket, that extra Rs 50,000 saves Rs 15,600 in tax.
The returns: NPS invests in a mix of equity (up to 75% for non-government subscribers under the active choice), corporate bonds and government securities. Long-term returns for aggressive allocation have averaged 10-12%.
The real downside: the 40% annuity rule. You lose control over nearly half your corpus at retirement, and annuity rates in India are poor (5-7%). The mandatory annuity is NPS's biggest weakness.
### 4. ELSS vs PPF — how to decide
This is the most common question at tax season. Here is the framework:
Pick ELSS if: you are under 40, can handle 3-year lock-in, want higher long-term returns, and understand that year-3 value might be lower than your investment.
Pick PPF if: you want zero risk, are comfortable with 15-year lock-in, or are building a child's education or marriage corpus where capital preservation matters more than high returns.
Split 50-50 if: you have a full Rs 1,50,000 to invest and want both growth (ELSS) and safety (PPF). This is a balanced, hard-to-fault approach.
Beyond 80C — deductions most people miss
### 5. Health insurance premium — Section 80D
You can deduct up to Rs 25,000 for health insurance premium paid for yourself, spouse and dependent children. If you are also paying for parents, add another Rs 25,000 (Rs 50,000 if parents are senior citizens). The total possible deduction is Rs 50,000-75,000.
This is entirely outside 80C. Use it.
### 6. Home loan interest — Section 24(b)
Deduct up to Rs 2,00,000 per year on interest paid for a self-occupied home loan. This is above and beyond the 80C principal repayment benefit (which shares the Rs 1,50,000 80C bucket).
If the property is let out, there is no upper limit on interest deduction — though the overall loss set-off against salary is capped at Rs 2,00,000.
### 7. Education loan interest — Section 80E
Interest paid on an education loan taken for yourself, spouse or children is deductible for 8 years from the start of repayment, with no upper limit on the deduction. This is one of the most underused deductions.
### 8. Employer NPS contribution — Section 80CCD(2)
If your employer contributes to your NPS (up to 10% of basic + DA for private sector, 14% for government), that contribution is deductible from your income with no upper limit. This is the single most powerful tax break available to salaried employees, and most people do not negotiate for it.
What does NOT save tax
- Fixed deposits (5-year tax-saving FD counts under 80C, but interest is fully taxable — making it the worst 80C option on a post-tax basis). - Gold — no direct tax benefit. Sovereign Gold Bonds have no 80C deduction. - Direct equity / mutual funds — unless it is an ELSS fund, no deduction. - ULIPs — technically qualify under 80C, but high charges erode returns badly.
New vs old regime — this matters
Under the new tax regime (the default since FY 2024-25), most deductions — including 80C, 80D, and home loan interest — are NOT available. You only get the standard deduction (Rs 75,000) and employer NPS contribution under 80CCD(2).
So before you invest for tax saving: check which regime you are actually in. If your employer has switched you to the new regime, your 80C ELSS and PPF contributions are not reducing your tax bill. Use our tax regime calculator to compare.
The optimal tax-saving stack for FY 2026-27
If you are in the old regime and earning Rs 18 lakh:
1. ELSS — Rs 60,000 (tax saved: Rs 12,480 at 20% bracket) 2. PPF — Rs 90,000 (tax saved: Rs 18,720) 3. 80C total used: Rs 1,50,000 — tax saved: Rs 31,200 4. NPS 80CCD(1B) — Rs 50,000 (tax saved: Rs 15,600 at 30% bracket) 5. Health insurance premium (80D) — Rs 25,000 (tax saved: Rs 7,800) 6. Home loan interest (24b) — Rs 2,00,000 (tax saved: Rs 62,400)
Total tax saved: Rs 1,17,000 — on legitimate investments and expenses you would have anyway.
The honest disclaimer
Tax-saving should be a secondary benefit, not the primary reason to invest. A bad investment that saves tax is still a bad investment. Pick products you would buy even without the tax break — ELSS because you want equity exposure, PPF because you want debt safety, NPS because you want pension. The tax benefit is the bonus, not the point.