List Of 6 Income Tax Saving Investments in Section 80C
What are some of the tax saving investments one can make in India? In order to answer this question, let’s take a look at some of the best tax-saving investments one can make. This is a list of 6 opportunities where you can invest and save money on your taxes.
Total amount of income tax deduction under sections 80C, 80CCC (investment in pension plan offered by an insurer) and Section 80CCD (1) (for NPS) cannot exceed Rs. 1.5 lakh in a financial year.
in the next few months, the accounting department of your organization will be able to request the proof of your tax-saving investments in Section 80C as well as other deductions. PPF (public provisionnt funds), ULIP (Unit Linked Insurance Plan), ELSS mutual funds (Equity Linked Savings Schemes), National Savings Certificate (NSC) 5 year bank fixed deposit (FDs) along with Sukanya Samriddhi Yojana is a few of the investments that provide tax advantages as per Section 80C. The ideal time to start making plans for tax-saving investments as early as when you begin the year.
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List Of 6 Income Tax Saving Investments in Section 80C
Financial planners say that the choice of investments to save income tax under Section 80C should be in line with your financial goals and wealth creation, not just avenues to save tax. An assessee can claim deduction of up to ₹ 1.5 lakh under Section 80C of the Income Tax Act for investments in specified instruments
National Pension System (NPS):
NPS is a contribution-based voluntary retirement savings plan. Employed and self-employed people can benefit from tax advantages for the investment in NPS. In section 80CCD(1) the investment in NPS up to 1.5 lakh can be claimed as an tax deductions on income. Be aware that the total deduction under section 80C and 80CCC (investment in a pension plan that is offered by an insurance company) or section 80CCD (1) (for NPS) does not exceed 1.5 lakh.
In addition, an investment up to ₹ 50,000 is deductible from taxable income under Section 80CCD (1B) of the Income Tax Act, 1961. This deduction is in addition to ₹ 1.5 lakh allowed under Section 80CCD (1).
Under current income tax laws, 40% of the amount of accumulated corpus in NPS at age 60 can be claimed as tax-exempt. The rest is taxable unless invested in purchasing an annuity plan.
NPS allows partial withdrawal of up to 25% of own contribution for specific expenses like children’s higher education or marriage, construction or purchase of the first house, and medical treatment. This withdrawal is tax-free.
A subscriber can exit NPS before the age of 60, but the subscriber must invest 80% of the corpus to buy an annuity. The 20% of corpus withdrawn is taxed according to the subscriber’s income tax slab.
Equity-Linked Savings Scheme (ELSS) Mutual Funds:
The mutual fund scheme is eligible for Section 80C tax benefits , but this scheme of mutual funds has a lock-in time for three years. This is the among the lowest among Section 80C investment options. The returns of mutual funds ELSS that invest in a variety of shares, are dependent.
The gains from these tax-saving mutual funds are regarded as capital gains over the long term and are taxed at 10 percent. However, long-term capital gains in equity-based investments such as the tax-saving funds can be tax-free for up to 1 lakh per fiscal year.
Public Provident Fund (PPF):
Within the fixed income class which is government-backed, PPF is among the most well-known Instruments to save taxes under the Section 80C. The PPF’s interest rate is updated quarterly, and in the current quarter, it is 8% per year. PPF accounts have a maturation period of 15 years .
They are extended in five-year blocks. PPF accounts also offer loans and partial withdrawals. The minimum investment for PPF for a fiscal year is Rs 500 . up to 12 deposits are permitted in the financial year. The maturities funds and withdrawals are tax-free.
National Savings Certificate (NSC):
The five-year NSC or the National Savings Certificate currently fetches interest of 8%. There is no upper limit for investment in the NSC and the minimum investment required is ₹ 100. Deposits of up to ₹ 1.50 lakh in the NSC in a financial year qualifies for tax deduction under Section 80C.
Interest accrued yearly on NSCs is deemed to be reinvested on behalf of the investor and qualifies for deduction under Section 80C within the total limit of ₹ 1.5 lakh. But as the final year’s or the fifth year’s interest is not reinvested, it cannot be claimed as a deduction from taxable income under Section 80C. Therefore, the last year’s interest income is added to the certificate-holder’s income and taxed accordingly.
Sukanya Samriddhi Yojana (SSY):
This well-loved girl savings scheme for children currently earns an interest rate of 8.5 percent which is compounded every year. In the course of this year’s fiscal year, India’s government cut down the minimum deposit amount to open a Sukanya-Samriddhi account by Rs 250 from the previous Rs 1,000. The annual minimum deposit requirement for opening a Sukanya Samriddhi accounts every year has been reduced to Rs 250, down from 1,000 in the past.
Sukanya Samriddhi accounts will mature 21 years after the date of opening. Part withdrawals are permitted when the girl turns 18. Contributions to the Sukanya Samriddhi account that exceeds 1.50 lakh during a financial year can be a tax deductions in accordance with Section 80C of the Income Tax Act. In addition, the interest paid and the maturity amount are not tax deductible.
Unit Linked Insurance Plan (ULIP):
ULIPs are hybrid products that offer life cover along with investment. The investment component in a Ulip works like a mutual fund, but with a different cost structure. Ulips come with a lock-in period of five years. Investors get tax benefits up to ₹ 1.5 lakh insurance premium, under Section 80C. This tax benefit is available only if the cover is 10 times the annual premium.
Tax-Saving Bank or Post Office Fixed Deposits:
This special category of bank fixed deposits can help you claim deductions under Section 80C of the Income Tax Act. Five-year post office term deposits also qualify for this tax benefit. But there is a minimum lock-in period of five years. SBI, for example, is offering 6.85% interest on these deposits.
We hope you enjoyed our blog on the best investments to make with section 80C. Section 80C is a part of the Income Tax Act that offers tax benefits to certain investments. You can make some excellent investments with section 80C and we want to share what they are with you. Please contact us anytime if you have any further questions or concerns by commenting below. Thank you for reading, we would love to hear from you!