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How do I save tax and earn 10 per cent returns?

Tax saving schemes invest in stocks and they have a mandatory lock-in period of three years

I got married recently and I want to start a monthly Systematic Investment Plan (SIP) of ₹5,000. I want to save tax and earn 10 per cent returns. I don't want to lose any rupee which I have invested. This Investment is for my children's education.
- Ravi C

If you want to save taxes and earn double-digit returns, you should consider investing in Equity Linked Savings Schemes (ELSSs) or tax saving schemes. Though theoretically these schemes (or any equity schemes) can offer superior returns than other asset classes over a long period, they do not guarantee any returns or return of capital. So, if you don't want to take any risk at all, you should stick to safe options like 5-year tax saving fixed deposit, Public Provident Fund, etc. However, if you are ready to take extra risk and hold on to your investments for a long period, you should consider investing in tax saving schemes.

Tax saving schemes invest in stocks and they have a mandatory lock-in period of three years. However, you should invest in them only if you can hold on to your investments for at least five years. We recommend equity schemes to investors only if they have a long investment horizon of five to seven years. This is because though stocks have the potential to offer better returns than other asset classes over a long period, they can be volatile and risky in the short-term. However, you can ride the volatility if you are prepared to stay invested for a long period. Since you are planning to use the money for your children's education, you have time in hand. So can consider investing in equity and earn better post-tax returns.

Here is a list of top-rated tax saving schemes.

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