Introduction
Tax saving is a major concern for salaried individuals, freelancers, and small business owners alike. While most people know about mutual funds like ELSS (Equity Linked Saving Schemes), many are unaware that you can legally combine certain government schemes with mutual fund investments to maximize your tax savings.
This blog explains how you can combine mutual funds with key Indian government yojanas to save more tax under Section 80C and build long-term wealth at the same time.
Understanding ELSS Mutual Funds
ELSS mutual funds are a type of equity mutual fund that qualifies for tax deductions under Section 80C of the Income Tax Act. You can claim a deduction of up to тВ╣1.5 lakh per year by investing in ELSS.
Key benefits:
- Lowest lock-in period of 3 years among 80C options
- Higher potential returns than traditional tax-saving schemes
- Suitable for long-term financial goals
Yojanas You Can Combine with Mutual Funds
Here are five major government yojanas you can strategically combine with ELSS mutual funds to optimize your tax savings:
- Public Provident Fund (PPF)
PPF is a trusted and safe long-term investment with tax-free interest. While PPF provides security, ELSS offers higher returns.
Combined benefit:
- PPF gives guaranteed, risk-free returns
- ELSS balances the portfolio with market exposure
- Together, they provide stability and growth under Section 80C
- Sukanya Samriddhi Yojana (SSY)
For those with a girl child, SSY is one of the best tax-saving investments. It offers attractive interest rates and tax benefits.
Combined benefit:
- Use SSY for your daughterтАЩs future
- Use ELSS for your own retirement or education planning
- Both qualify under Section 80C, helping you reach the тВ╣1.5 lakh cap
- National Pension System (NPS)
NPS offers tax benefits under Section 80CCD(1B), in addition to the тВ╣1.5 lakh limit of Section 80C.
Combined benefit:
- ELSS gives equity-based returns with 3-year lock-in
- NPS offers long-term retirement corpus with added tax deduction of тВ╣50,000
- Use both to claim up to тВ╣2 lakh in total deductions
- Senior Citizen Savings Scheme (SCSS)
If youтАЩre planning for or supporting senior parents, SCSS is a government-backed savings plan with assured returns and tax benefits.
Combined benefit:
- Invest in SCSS for stable income for parents
- Invest in ELSS for your own long-term growth
- Helps cover both family needs and personal wealth creation
- Atal Pension Yojana (APY)
Aimed at unorganized sector workers, APY provides a fixed monthly pension post-retirement.
Combined benefit:
- Use APY to secure retirement income
- Use ELSS for building a retirement corpus with market exposure
- Smart for young investors seeking both security and growth
Smart Tax Planning Strategy
To save tax legally and efficiently:
- Start a monthly SIP in ELSS mutual funds
- Open a PPF or NPS account for long-term goals
- Combine with government schemes like SSY or SCSS for family benefit
- Ensure your combined investments stay within your annual income limit
Conclusion
Combining mutual funds with government yojanas is not only legal but highly effective for both saving tax and building wealth. While ELSS gives you flexibility and growth, schemes like PPF, NPS, and SSY offer security and guaranteed returns. Together, they form a strong, diversified strategy to protect your future and optimize your tax outgo.
Plan early, invest wisely, and take full advantage of the government-approved options available in 2025.