Investments are all about growing your money through equities, debt instruments, gold and fixed assets such as land. But most of these investments come with a hefty tax bill on their maturity. How about investing in avenues that offer tax-free returns even during maturity? While the options are quite limited and are mostly in the fixed income space, they continue to attract the interest of investors. Here is a primer on investment options, which come under the EEE (Exempt, Exempt and Exempt) category in tax parlance, that do not attract any tax at any stage. They include PPF (Public Provident Fund), Sukanya Samriddhi Yojana, certain life insurance policies and equity-linked savings schemes (ELSS) among others.
Public Provident Fund
PPF is easily the top-star in the EEE space. Often compared to the statutory EPF (Employees’ Provident Fund), it is not taxed at any stage of investment. You can keep the PPF account alive with a minimum investment of ₹500 in a financial year. Here are some of PPF’s features.
Minimum deposit ₹500 and maximum deposit ₹1.5 lakh in a financial year.
Loan facility is available from third financial year and lasts up to sixth financial year.
Withdrawal is permissible every year from seventh financial year.
Account matures on completion of fifteen complete financial years from the end of the year in which the account was opened.
After maturity, account can be extended for a block of five years with further deposits.
Account can be retained indefinitely without further deposit after maturity with the prevailing rate of interest.
The amount in the PPF account is not subject to attachment under any order or decree of a court of law.
Deposit qualifies for deduction under the Income Tax (IT) Act
Interest earned in the account also does not attract any taxes
The interest rate has been fixed at 7.1% per annum compounded annually for 2025-26.
Sukanya Samriddhi Account Scheme
The scheme was started with the aim of helping parents to build a corpus for the education of the girl child.
Minimum deposit ₹250 and maximum deposit ₹1.5 lakh in a financial year.
Account can be opened in the name of a girl child till she attains the age of 10 years.
Only one account can be opened in the name of a girl child.
Account can be opened in post offices and in authorised banks.
The account allows 50% withdrawal at the age of 18 for higher education purposes.
The account can be prematurely closed in case of marriage of girl child after her attaining the age of 18 years.
The account shall mature on completion of a period of 21 years from the date of opening of account.
Deposit qualifies for deduction under IT Act.
Interest earned in the account is also tax-free
The Sukanya Samriddhi Account Scheme offers an interest of 8.2% per annum compounded annually for 2025-26.
Life Insurance policies
The IT Act allows exemptions to investments made in life insurance policies. But they come with a set of restrictions. Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is fully tax exempt on fulfilment of the following conditions
Equity-linked Savings Schemes (ELSS)
ELSS investments offer tax deductions of up to ₹1.5 lakh in a financial year, but this is applicable only if you have opted for the ‘Old Tax Regime’. ELSS comes with a mandatory lock-in period of three years, which is the shortest among the tax-free investment options available now. Gains of up to ₹1.25 lakh are tax-free in a financial year. Any profits that are above this amount attract a long-term capital gains tax of 12.5%.
If you choose the dividend option under ELSS, the dividends earned will be added to your taxable income and taxed according to your IT slab. You can invest either as a lumpsum or through a SIP (Systematic Investment Plan). But each SIP will be treated as a separate investment and will be locked-in for three years.
EPF, Gratuity Withdrawals and others
Though they do not strictly fall under regular investment options, withdrawals from EPF and gratuity after completion of five years of service are also tax exempt subject to certain conditions. Gratuity is tax exempt up to ₹20 lakh for private sector employees. No such limit is applicable for EPF withdrawals.
Interest on ‘Gold Deposit Bonds’ issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the ‘Gold Monetisation Scheme, 2015’ notified by the central government are also exempt from tax.
Interest on bonds issued by a local authority or by a ‘State Pooled Finance Entity’ as specified by the central government, by notification are also exempt. Any sum received as ‘lump sum amount’ from the ‘National Pension System Trust’ by an assessee being a subscriber to the ‘Unified Pension Scheme’ has also been exempted.