Tax saving options under section 80c
The details of Deduction – instruments- investments, savings, insurance, and tuition fees
The tax-saving instruments under section 80 C and other avenues have the potential to take care of tax –payer’s major investment needs and help him/her to achieve financial goals.
Additionally, it helps the assessee to make major financial decisions related to education, home-buying, health care. It also e
1. 80C tax saving Investment and instruments – Short term, medium term and long term investments. It also offer tax deduction tution fee, home loan principal repayment and life insurance premium
2. Tax saving instruments other than 80C – Over and above Rs. 1,50,000 these options are mostly on expenditure related tax breaks
This post is clearly
Section 80C is a beautiful way government has ensured a discipline amongst the lower income and mid-income group. The investment avenues offers instrument with 3 year to upto retirement lock-in period options. It perfectly suited for individuals for addressing the financial needs arise at various stages in the ifetime. It offers equity investments which has a potential to create a long-term kitty, to 5 years Fixed deposits and certificates which take care mid-term requirement. The long-term fixed-income instruments PPF, EPF and NPS which are specifically designed for the retirement and pension purposes. These tax-saving options under section 80c are instruments which one can avail every financial year has the potential to take care of tax –payer’s major investment needs and help him/her to achieve financial goals.
The list of instruments –
1. Equity Investment (Pure Equity)
ELSS MF – Tax saving mutual Fund or ELSS is the option with
2. Medium-term debt investment (maturity of 5years)
Bank – Tax saving FD – This instrument is ideal for medium term investment. With a Lock-in time period of 5 years, one can invest anything between 1 thousand to 1.5 lakh year for the purpose of saving tax. However, on maturity, the interest amount attracts tax as per the tax slab of the individual. The FD can be opened online or offline in any public sector or private sector bank. The interest rate is as per the bank FD rates, it offers lower rates compared to PPF, EPF or NSC.
NSCs or National Saving certificates – One can purchase it from designated post-office, has a lock-in period of 5 years. The investment is capped at Rs. 1,50,000 for each financial year to save taxes under Section The interest earned on this taxable. The amount is compounded annually.
Other popular investment in fixed income includes Kisan Vikas Patra, Senior citizen deposits and 5 year-term deposits in post-office.
3. Long term fixed income investment (variable upto retirement)
Company EPF – (Lock-in Upto retirement) A traditional option going on for decades, this is done by corporates and government organization. Company do it as per the employment policy.
Limit – 12% of the basic pay is the minimum contribution by employee, employer is supposed to match the investment and a corpus is built. This cannot be withdrawn as and when, however, employees are allowed to take loan for daughter’s marriage, home loan servicing and for home buying purposes only. EPF rules have changed over the years. The new rule includes having a curb on the withdrawal to curb investors withdrawing this money. One needs to service 5 years before he can put in a request for withdrawal. However for home loan repayment lock–in is 7 years and education is 10 years.
The interest rate is decided every year, the amount is compounded annually. The rate of interest is marginally higher than bank fixed deposits. This is also a good option to build retirement kitty
PPF – Public provident plan –(Lock-in – 15 years) Alternate to company provided EPF, PPF account can be opened in public sector banks even some private banks these days. PPF account has a lock in period of 15 years, minimum investment amount per year is Rs. 500, one can deposit upto 1.5 lakh. The interest rate is higher than Bank FD however could be little lower than EPF. The lock-in 6 years, after which partial and conditional withdrawal is allowed. The account matures in 15 years, post which one can extend upto 5 years requesting the Bank. Previously only public sector banks and Post office could were allowed for PPF Account, now few public sector banks have been allowed for the same. Now PPF account can be opened in HDFC, ICICI, Kotak, IDBI and AXIS amongst others. The investment as well as the maturity is tax free in the hands of investor.
Sukanya Samriddhi Yojana –(Lock-in- girl child attaining 18 years) The scheme goes by the name. One can invest
4. Pension Funds
Pension schemes – Under 80CCD – Currently there are two major pension plans are there –Atal Pension Yojana and National Pension Scheme (NPS) which allows 1,50,000 investment for tax benefits, also, the deduction is allowed for contributions made to notified pension scheme if the same does not exceed
10% salary in case of an employee, or 20% of the gross total income in case of self-employed.
There is an
additional option of investing upto Rs. 50,000 and claim tax deduction on the
5. Life Insurance premium
Life Insurance premium – Payments in insurance premium allows tax deduction. Taxpayer can claim the benefit for self, spouse and children Section 80C. The condition here is sum assured should not be less than 10 times the annual premium. However, the premium itself attracts service tax upto 18%. However he maturity proceed or the claim on death is tax free in the hands of self/ nominee. One have the option to choose between term plan, ULIP and endowment plan or guaranteed return plan. In the ULIP plan, the mnimum lock-in period is 5 years. Endowment plans come with a minimum lock-in of 10 years, term insurance is indemnity plan.
6. Home-loan support
Home loan principal payment – Home-loan principal amount repayment can be claimed under 80c. The threshold per year is Rs. 1.5 lakh. One can also claim tax benfits for stamp-duty, registration cost etc.
7. Supporting children
There are many other ways of getting tax-breaks which will be discussed in other posts.