Retirement is a crucial life stage. Everyone wants to be financially independent at that age. Hence, selecting the right tax-saving investment instrument is vital, both during the accumulation phase and after retirement. You can choose a suitable tool based on your age from the following:

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Here are some investment avenues that allow you to build wealth while saving on taxes.

ELSS Mutual Funds

Mutual funds are a great way to accumulate wealth over time. They offer inflation-beating returns. Under Section 80C of the Income Tax Act of 1961, contributions to Equity-Linked Savings Schemes (ELSS) are eligible for deductions of up to Rs 1.5 lakh in a financial year. An ELSS has a three-year lock in. However, these funds are not entirely risk-free as they invest in the market. Despite this, they offer significant returns and are an effective tax-saving tool.

Fixed and Recurring Deposits

Senior citizens aged 60 and older can claim tax deductions of up to Rs 50,000 for interest earned from bank and post office deposits, cooperative societies, and tax-saving fixed deposits (FDs) under Section 80 TTB of the Income-tax Act, 1961.

Bonds

Tax-free short- to medium-term bonds are a great option for senior citizens seeking regular income. These bonds are issued by the government and offer tax-free interest income. These bonds are risk-free investments. They provide better credit ratings, and higher liquidity and yield at maturity. However, selling these bonds after a year will attract a long-term capital gain tax.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

PMVVY is a pension scheme for seniors over 60. It offers guaranteed monthly income with a 10-year lock-in. The PMVVY allows lump sum investments and provides a 7.4 per cent interest rate; monthly pensions range from Rs 1,000 to Rs 10,000. Contributions to PMVVY do not qualify for deductions under Section 80C, but they are exempt under Goods and Services Tax.

National Pension System (NPS)

NPS is a retirement savings plan that offers monthly pensions. NPS contributions can continue till 70. NPS subscribers are eligible for tax benefits of up to Rs 1.5 lakh under Section 80 CCE and Section 80 CCD(1) and an additional deduction of Rs 50,000 under Section 80CCD (1B) for contributions to NPS Tier I accounts.

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Public Provident Fund (PPF)

PPF is a long-term post office deposit plan with a maximum and minimum investment limit of Rs 1.5 lakh and Rs 500 annually, respectively. It has a 15-year lock-in. PPF is a safe investment plan; all the proceeds (investments and interest amount) at maturity are tax-free. It allows deductions of up to Rs 1.5 lakh in a financial year under section 80C of the Income Tax Act.