Top tax* saving investment options under section 80C
Government of India allows tax* benefits on investments under Section 80C of the Income Tax Act, 1961. Under this section, taxpayers can invest their income in certain instruments and claim the investments made by them as deductions from their taxable income. The maximum deduction allowed under this section is ₹ 1.5 lakh per financial year. Below are some tax* saving investment options under Section 80C:
Equity Linked Savings Scheme (ELSS)The Equity Linked Savings Scheme or ELSS allows you to invest in tax* saving mutual funds. These funds invest at least 80% of your investment in equity markets or stocks. That is why returns on ELSS investments are subject to the market’s performance over the years.
ELSS funds come with a lock-in period of three years, which is the lowest among all tax* saving instruments under Section 80C of the Income Tax, 1961. So, if you are looking to invest in a tax* saving, market-linked instrument for a comparatively shorter term, you can consider ELSS.
National Pension Scheme (NPS) Tier-IIt is another long-term investment option that provides tax* benefits under Section 80C. It is a Government-backed scheme that helps you save for your post-retirement goals through systematic investments during your earning years. By investing in an NPS Tier-I account, you can also get additional tax* benefits of ₹ 50,000 under Section 80CCD (1B). And since an NPS Tier-I account is specifically meant for retirement savings, the lock-in period is till you turn 60.
Public Provident Fund (PPF)This is another Government-backed long-term savings scheme that provides tax* benefits under Section 80C of the Income Tax Act, 1961. This scheme allows you to make regular investments (at least ₹ 500) every year in a PPF account. Investments made up to ₹ 1.5 lakh in this instrument are available for tax* deductions. PPF comes with a lock-in period of 15 years, after which you can increase your investment tenure in the block of five years.
Employee Provident Fund (EPF)This is a government-backed retirement savings scheme available only for salaried individuals in India. The benefits of this scheme can be availed by government employees as well as private-sector employees. Under this scheme, a certain amount is deducted from your salary and is invested in your EPF account by your employer. Your employer also deposits the equivalent amount to your EPF account. EPF investments can be withdrawn after five years of continuous service.
Fixed DepositsYou can also invest in tax-saving* Fixed Deposits (FDs) to save income tax* under section 80C of the Income Tax Act, 1961. Tax-saving* FDs work just like any other FD and the only difference is that they come with a fixed lock-in period of five years. Investments made in FDs offer guaranteed returns on maturity and the minimum investment amount is ₹ 1,000. However, the rate of return may vary from one bank to another.
Sukanya Samriddhi Yojana (SSY)Sukanya Samriddhi Yojana or SSY is a government-backed scheme aimed to improve the lives of girl children in India. This scheme was launched in 2015 under the “Beti Bachao Beti Padhao” campaign of the Indian Government. It helps you save for your daughter’s education and marriage expenses. The minimum investment amount for this scheme is ₹ 250 and the withdrawal can be made only after your daughter turns 18.
Unit-Linked Insurance Plan (ULIP)A Unit-linked insurance plan or ULIP is a tax-saving* financial product that offers the dual benefit of life insurance and investment. ULIPs help you to grow your money for your long-term goals while also protecting the future of your loved ones financially with a life cover in case of an unfortunate event.
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*Tax benefits are subject to conditions under Section 80C, 80D, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services tax and Cesses, if any will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for more details