Tax saving investments made during a financial year can be claimed as the deduction under Section 80C for that financial year. In this article, we are discussing 7 avenues to save tax under Section 80C of the Income Tax Act.
Every year you can invest Rs 1.5 lakh in any tax savings instruments and claims deduction under Section 80C. If you are fall in 30% tax bracket, by investing Rs 1.5 lakh you can save tax up to Rs 46,350.
Here are seven tax savings instruments:
Equity Linked Savings Scheme (ELSS)
Equity Linked Savings Scheme (ELSS) is a diversified equity mutual fund, which is qualified for deduction of ₹ 1, 50,000 under section 80C of the Income Tax Act. ELSS tax saving fund has the shortest lock-in period to compare with other investment products. Dividend declared in ELSS funds is tax-free and no tax levied on the long-term capital gains.
You can make a lump-sum or one-time investment in an ELSS fund or be using the SIP route.
To read more about Equity Linked Savings Scheme (ELSS)
Bank Fixed Deposits
A bank fixed deposits taken for a term of 5 years is only eligible for tax deduction. Apart from this bank FD provide safe and guaranteed return. Interest on FD is taxable. Premature withdrawal is not available. Deposits can be opened both singly and jointly. In the case of a joint account, the tax benefit will be availed by the first holder of the deposit as per the section 80C of the Income Tax Act, 1961.
Nation Pension Scheme (NPS)
The National Pension Scheme (NPS) was introduced by Government of India on 1st January 2004 with the objective of providing retirement income to all the citizens.
Finance Minister Arun Jaitley in Budget 2015-16 introduced an additional income tax deduction of Rs. 50,000 for contribution to the New Pension Scheme (NPS) under Section 80CCD. NPS is a voluntary pension scheme, which is regulated by the Pension Fund Regulatory and Development Authority.
National Saving Certificates (NSC)
NSC specially designed for government employees, businessmen and other salaried classes who are income tax assesses. NSC is issued by the post office and can be taken from any branch of the Indian postal service. There is no maximum limit for investment in NSC. Investment up to ₹100,000.00 qualifies for deduction under Section 80C of IT Act.
Mainly bought for the purpose of protecting one’s family. One can save tax under Section 80C as well as under section 10(10) D where maturity benefits also get exempt from income tax. A product like ULIP help in providing protection and investment growth and can be made particular goals.
Senior Citizen Saving Scheme (SCSS)
It one of the best tax saving solution for senior citizens, who have reached age 60. If an employee is taking VRS (Voluntary retirement) then he/she can open their SCSS account even the age 55 provided that the account is opened with a month of the date of receipt to avail retirement benefits. The maturity cycle is 5 years and it can be further extended for a period of 3 years if needed.