New Tax Regime: Should you still invest in tax-savings instruments such as PPF, NSC, ELSS, SCSS? | Mint

Thanks to Budget 2025, new tax regime has become even more lucrative now. With no income tax for those who earn up to ₹12 lakh a year, taxpayers have one more reason to abandon choose new regime over old tax regime.

This means more and more taxpayers will now choose the new tax regime, particularly those falling in the lower income bracket. Chairman of CBDT Ravi Agrawal even claimed that 90 percent of taxpayers may switch to the new tax regime from 75 percent currently.

This means taxpayers will lose out on the benefits of old tax regime which include deductions and exemptions offered for investing in tax-saving instruments such as PPF (public provident fund), National Savings Certificate (NSC), Sukanya Samridhi Yojana (SSY) among others.

Tax benefits you lose under the new tax regime:

1.Section 80C investments: Investment made in ELSS, PPF, SPF, RPF, payments made towards Life Insurance Premiums, the principal sum of a home loan, Sukanya Samriddhi Yojana, National Savings Certificate, and Senior Citizens Savings Scheme.

2.Section 80D: Payment made towards medical insurance premiums up to a maximum limit of ₹25,000 and ₹50,000 for senior citizens.

3.Section 80CCC: Payment made towards premium of a pension fund.

When investing in these instruments does not lead to any tax saving under the new tax regime, why would investors then invest in any of these instruments? Imagine someone investing ₹one lakh in a PPF and not being able to claim a tax exemption in order to earn 7.1 percent interest in return.

One could, instead, invest in equity. Experts, however, have a mixed view on this.

Investment & tax saving are separate

Some believe that it is still alright to continue investing in the tax-saving instruments because investing should ideally be seen differently from tax-saving.

“Investments and tax should not be mixed. Though investments should be made in avenues that offer tax efficient returns, taking decisions solely to save taxes should be avoided. PPF and SSY still offer decent returns with almost zero risks, but come with long lock-in, in such a scenario, investors must check for what asset classes are investible, understand their risk appetite & objectives and then invest,” said Siddharth Alok, AVP Investments, Epsilon Money.

Financial discipline

There is another view point that investment in fixed income instruments is important not only for saving tax but also for inculcating fianancial discipline.

Alekh Yadav, Head of Investment Products at Sanctum Wealth said, “These investments offer guaranteed and risk-free returns. Their lock-in periods promote disciplined savings and enable the benefits of compounding. Therefore, despite the absence of tax deductions under the new regime, such instruments remain a prudent investment choice for many individuals.”