Most of us are already known the deduction available under section 80C of the Income-tax Act, 1961. The maximum deductions that we can claim is Rs.1,50,000/- for a F.Y.
Section 80C offers various investment options to the taxpayer to generate returns for him and also be claimed as deduction while calculating total taxable income.
What is Sec 80C?
As per provisions of Section 80C, You can claim a deduction of Rs. 1,50,000/- from your total income earned during the year. In simple words, you can reduce up to Rs. 1,50,000/- from your total taxable income, and the benefit of section 80C is only available for individuals and HUFs. Here in this article, we are discussing what options we have for 80C deductions.
Followings are the best options available for 80C deductions are :-
(1.) Life insurance premium
Any premium paid towards life insurance premium for yourself, your spouse, or your children can be included in Section 80C deduction. If the premium paid by you for your parents (father/ mother/ both) or your in-laws is not eligible for deduction under Section 80C. If you are paying premiums for more than one insurance policy, (which can be LIC or any other) all the premiums can be included.
(2.) Five Years Bank Fixed Deposits (FDs)
Any Bank FD with a tenure of 5 years with a scheduled bank also qualifies for deduction under section 80C and the interest earned on it is taxable. Tax-saving Term Deposits are like regular fixed deposits but come with a lock-in period of 5 years.
(3.) Five year Post Office Time Deposit (POTD)
Post office Time Deposits are equivalent to bank fixed deposits. only five-year Post office deposits qualify for tax-saving under section 80C. The interest rate on POTD is decided by the government of India every quarter.
(4.) ULIP-Unit linked Insurance Plan
ULIP is a type of insurance product that covers life insurance with the benefits of equity investments. ULIPs are a mix of insurance plans and investments. Ulips help you to grow your money over the long-term. In the ULIP some part of your premium Invested in stock markets by Ulip’s Experts.
(5.) Public Provident Fund (PPF)
The Public Provident Fund is a long term investment plan run by the government of India. Deposits made in a PPF account are eligible for Section 80C deductions. PPF has a 15-year lock-in period with partial withdrawals limited to 50% of the corpus, allowed beyond the 5th year. A foreclosure after 5 years is permitted for medical/education purposes, subject to some conditions.
(6.) Equity Linked Savings Scheme (ELSS)
ELSS are some types of mutual fund (MF) schemes specially made to offer you tax savings under income tax and these are called Equity Linked Savings Scheme (ELSS). ELSS has the potential of earning higher returns compared to other tax-saving schemes as it is equity-linked, but this means that it comes with higher risk. ELSS has no limit for Investment, but the tax benefit is available only 1,50,000/-. ELSS scheme comes with a lock-in period of 3 years and it is the lowest among all the options available under section 80C.
(7.) Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana (SSY) is the part of Government initiative Beti Bachao, Beti Padhao campaign. It is a savings scheme launched back in 2015 by the Government of India. This scheme enables guardians to open a savings bank account for their baby girl with a Public or Private bank or Post office branch.
(8.) NPS (National Pension System)
The National pension system is a pension scheme that has been launched by the Indian Government to allow the unorganized sector and Job professionals to have a pension after retirement. Investments in NPS are up to Rs 1,50,000/- can be used to avail tax deductions under Section 80C.
(9.) Employee’s Provident Fund (PF) and Voluntary Provident Fund (VPF)
Employees Provident Fund is a retirement benefit plan that is available to all salaried employees. EPF amounts to 12% of basic salary + DA, which is deducted by an employer from his salary and deposited in the EPF account of employees or other recognized provident funds.
(10.) Payment of Tuition Fees
If you are paying your children’s school fees that can’t be ignored. the amount paid by you as tuition fees (excluding development fee and others), whether paid at the time of admission or thereafter, is eligible as an 80C deduction to you and will help you in saving tax. and you should note that the fees paid to a school, college, or university in India only is eligible for 80C.
(11.) Principal Repayment of Home Loan
The monthly EMI that you are paid for repayment of your home loan is consists of two components – Principal and Interest. The principal part is qualified for deduction under Section 80C. Even the interest part also can save your significant income tax, but that would be cover under Section 24 and section 80EE of the Income Tax Act.
(12.) National Savings Certificate (NSC)
The National Savings Certificate (NSC) is an instrument that is locked-in for a period of 5 years. It is a low-risk investment option. NSC is a cumulative investment plan where the interest income is not taxable, but is also eligible for further deduction u/s Section 80C.