4 Investments That Offer Tax Free Income In India

There are only a few investments that offer tax free income in India. In fact, if you invest in bank deposits or any other deposits or even shares, they all are taxable. The interest income from bank deposits have to be offered for the purpose of tax. Similarly, the capital gains arising on sale of shares has to be offered for the purpose of income tax. However, there are a few investments that offer tax free income in India. nbsp; The Public Provident Fund offers tax free income in India. In fact, PPF offers the twin benefits of Sec80C and interest income being free from tax. The interest rate on the PPF also makes it extremely attractive for the purpose of investment. The only problem is that there is a restriction on the amount invested, which is upto Rs 1.5 lakhs.If you are looking to invest for a longer term and build a decent size corpus this is a good investment bet. However, the lock-in period is a drawback. So, if you are not a long-term player, it is better to avoid this investment. Since it is backed by the government of India it is also a very safe investment.Advertisement The Sukanya Samriddhi is another investment that offers tax free income. Not only is the income earned tax free in the hands of the investor, but, the amount of investment qualifies for tax break under Sec80C of the Income Tax Act.The rate of interest too is very attractive at 8.40 per cent. Remember the government alters the interest rate and hence it is never the same.The account can be opened only in the name of a girl child and partial withdrawal is only permitted after the girl child attains an age of 18 years. In fact, the account can only be closed after the girl child has completed 20-years of age. Apart from the provident fund, investors have an option to increase their contribution by way of Voluntary Provident Fund.The VPF is another excellent way to save tax. The interest income is exempt from tax, provided you have stayed invested for a period of 5 years.The VPF contribution earns the same interest like the EPF and is an excellent tool, because the interest earned is tax free after 5-years and also because the interest itself is a good 1 to 2 per cent over and above the interest rate offered by banks.Investors can earn a good interest rate and remember that the VPF is very safe investment. This is a much better investment to choose from, when compared to other investments. Unit Linked Insurance Plan is another place where your income is exempt under Section 10 (10D) of the Income Tax Act 1961. However, only condition is that the annual premium should be less than 10% of the sum assured for the plans purchased after April 1, 2012.ULIPs tend to offer investors the benefit of insurance and investment. In the initial years the returns from this investment is very low and hence investors should stay invested for the long term. You can choose from equity or debt or a combination of both.