While investing in a tax-saving instrument or any investment for that matter, it is important to keep an eye on the taxability of its income. If the income earned is taxable, the scope to make money over the long-term gets constrained as taxes will eat into your returns.
Most of us are already well aware of the deduction available under section 80C of the Income-tax Act, 1961. The maximum amount of deduction that can be claimed under section 80C is Rs 1.5 lakh for the current financial year. The section offers various investment options to the taxpayer which not only generate returns for him but can also be claimed as deduction while calculating total taxable income.
80C – Tax Saving Options
Mutual Fund Equity Linked Savings Scheme (MF ELSS): This has the lowest lock-in period of 3 years. In case of a monthly SIP, each installment has a 3-year lock-in.
Unit Linked Insurance Plans (ULIPs): ULIPs are market-linked investments offered by insurance companies; lock-in period of 5 years and gains post-lock-in are tax-free.
National Pension System (NPS): Investments of up to 1.5 lakh rupees can be claimed for the tax deduction in a financial year. Besides, an additional deduction of up to 50,000 rupees can be claimed under Section 80CCD(1B).
Employee Provident Fund: This is your contribution towards the provident fund that gets deducted from your salary. Contributions towards Voluntary Provident Fund can also be considered for deduction.
Public Provident Fund: This investment has one of the longest tenures of 15 years with a further extension of 5 years allowed each time. The interest rates are linked to that of government securities.
National Savings Certificate (NSC): Investments in NSC can be claimed as a deduction.
Bank Fixed Deposits: Fixed deposits of 5 years with a scheduled bank are eligible for deduction.
Senior Citizen Savings Scheme (SCSS): Investments in SCSS can also be claimed as a deduction.
Life Insurance Premium: You can claim this deduction when you pay the life insurance premium for yourself, your spouse or your children.
Tuition Fees: If you have paid tuition fees towards the full-time education of your children, you can claim for up to two children.
Home Loan principal repayment: Repayment of principal amount towards a housing loan can be considered.