New Tax Regime: The new tax regime for FY 2023-24 has created a new financial landscape for Indian taxpayers. After becoming the default system, many people are confused about the relevance of traditional tax-saving instruments like Public Provident Fund (PPF), National Savings Certificate (NSC), and National Pension System (NPS). These schemes, which were earlier popular for tax-saving benefits under Sections 80C, 80D, and 80CCD(1), are now losing their charm. But financial experts say that they still hold value for conservative investors and those with long-term financial goals.
Shift in Tax-Saving Priorities
Under the new tax regime, deductions that made PPF, NSC, and NPS attractive have been significantly reduced. This is why taxpayers are now exploring higher-return options such as equities and mutual funds. Still, for those seeking stability and security, these instruments can become part of a comprehensive financial strategy.
Benefits Beyond Tax Saving
While immediate tax-saving incentives are no longer relevant, the utility of PPF, NPS and NSC is not limited to just tax relief. These tools are useful for risk management, retirement planning, and portfolio diversification.
Guaranteed Returns for Conservative Investors
Swapnil Aggarwal, Director of VSRK Capital, says the appeal of low-risk options is still there. “After the new tax policy changes, schemes like PPF and NSC have become less attractive to taxpayers, but they offer guaranteed returns and are ideal for conservative investors,” he says.
For those with a low-risk appetite, these instruments can serve as a means of dependable wealth preservation, even if the returns are modest compared to equities.
Effective Retirement Planning
Manoj Trivedi, Director of Strategy at Maxiom Wealth, highlights the role of PPF in retirement planning. “PPF provides high post-tax returns from a safe borrower, which is a critical component of a retirement portfolio,” he says. Similarly, instruments like NPS provide a good option for structured retirement savings that ensure financial security in later years.
Flexibility and Financial Goals
Sandeep Agrawal, Director and Founder of Teamlease Regtech, points out a major advantage of the new tax regime: flexibility. “Now individuals can align investments according to their financial goals, choosing options with better returns or withdrawal flexibility,” he says.
This shift creates a strategic wealth generation pathway that is tailored to the individual’s risk appetite and liquidity needs.
Revisiting the Old Tax Regime
For those who still prefer traditional tax-saving benefits, the old tax regime is an option. Sudhir Kaushik, Co-Founder & CEO of Taxspanner, suggests that taxpayers who want to build long-term wealth can use instruments like ELSS, NPS, and ULIPs.
Why do traditional instruments still matter?
The new tax regime promotes diversification, but the value of traditional instruments cannot be ignored.
1. Risk Management: Instruments like PPF and NSC are safe havens for conservative investors.
2. Retirement Planning: NPS and PPF provide financial security for retirement.
3. Diversification: Low-risk options can be combined with equities and mutual funds to create a balanced portfolio.
Balanced Approach for Better Outcomes
Today’s evolving financial environment demands personalized investments. A robust portfolio can be created by keeping in mind financial goals, risk tolerance, and liquidity needs.
Even though tax-saving incentives are no longer the primary driver, instruments like PPF, NPS and NSC still play a vital role in wealth creation and financial security. According to experts, long-term growth and stability can be ensured by adopting a diversified investment strategy.
