Planning for your child’s future education? Combine EEE and ELSS to save tax, build wealth

As the cost of higher education continues to rise, Indian parents are turning to smarter financial planning strategies to secure their children’s future without bearing the full brunt of taxation. From guaranteed, tax-free instruments to market-linked mutual funds with tax benefits, experts advise a balanced mix of investments under the EEE and ELSS umbrellas for long-term wealth creation.

“Securing a child’s financial future is a long-term commitment that requires a strategic blend of wealth creation and tax efficiency,” says Niyati Shah, Vertical Head – Personal Tax at 1 Finance.

Shah highlights that India offers several tax-saving options under the Exempt-Exempt-Exempt (EEE) regime, where investments, interest earnings, and maturity proceeds are all tax-free. Key instruments under this category include:

Public Provident Fund (PPF): With a 15-year maturity, tax-free returns, and partial withdrawal flexibility after five years, PPF is ideal for long-term education planning.

Sukanya Samriddhi Yojana (SSY): Exclusively for the girl child, this scheme offers one of the highest interest rates among small savings and full tax exemption under Section 80C.

EPF and VPF: For salaried individuals, voluntary contributions to provident funds can be redirected to fund education while building a tax-free corpus.

For parents seeking higher returns over the long term, Equity-Linked Savings Schemes (ELSS) present a compelling alternative. ELSS mutual funds come with a three-year lock-in—the shortest among tax-saving investments—and offer equity exposure that can outpace inflation. They also provide deductions of up to ₹1.5 lakh under Section 80C and allow tax-free capital gains up to ₹1.25 lakh per annum.

“While EEE investments offer capital safety and guaranteed returns, ELSS provides market-linked growth potential,” Shah explains. A hybrid strategy that blends safe instruments like PPF or SSY with equity exposure through ELSS allows parents to build a resilient, tax-efficient portfolio tailored for future education and life milestones.

The takeaway? Start early, stay consistent, and diversify across safe and growth-oriented instruments. With thoughtful planning and tax-smart choices, your child’s dreams need not be limited by financial constraints.