The 80C Investment Guide

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  • 31 Jan 2023
The 80C Investment Guide

You can save up to Rs 1.5 lakh in taxable income under Section 80C of the Income Tax Act. However, are you aware of all the investment options covered under this section?

Here is a guide to the best investments for tax-saving under Section 80C:

Public Provident Fund (PPF)

It is perhaps the most popular investment under Section 80C, allowing you to invest between Rs 500 to Rs 1.5 lakh per year. The interest is compounded yearly, and the maturity period is 15 years, although it is renewable. Both the maturity amount and the interest accrued are tax-free.

National Pension Scheme (NPS)

This market-linked investment instrument invests 50–75% in equities, giving higher returns than other traditional schemes. Contributions to the NPS and the accumulated corpus are tax-free, up to Rs 1.5 lakh. The investment is locked until investors reach the age of 60 years.

National Savings Certificate (NSC)

An NSC has a maturity period of five years and can be bought for as little as Rs 500. The interest is compounded annually and is reinvested in the account each year. So, you can claim a new deduction annually. Only the final year’s interest is not reinvested, making it taxable.

Sukanya Samriddhi Account

This investment can be made for your daughter if she is a minor. Deposits are made for 15 years, and the scheme matures at 21 years. No deposits are required from the 16th to the 21st year. The annual deposit ranges from Rs 250 to Rs 1.5 lakh, and the deposits are tax-deductible up to Rs 1.5 lakh.

Senior Citizen Savings Schemes (SCSS)

Anyone over 60 years old can open an account under SCSS. If you are over 55 and below 60 years and have taken voluntary retirement, you can open an account within three months of your retirement date. You will get regular income while your investment is tax-deductible up to Rs 1.5 lakh.

Equity-linked Savings Schemes (ELSS)

These mutual funds are specially made to offer tax benefits. The investments made are tax-free, up to Rs 1.5 lakh. ELSS offers the potential to give the best returns among all investments. They are used for wealth generation and have a lock-in period of three years.

Unit-linked Insurance Plan (ULIP)

ULPs combine insurance and investment or wealth generation under a single plan. A part of the premium is allocated to life cover, while the rest is invested in equity or debt instruments. ULIPs have a lock-in duration of five years. The premiums paid are tax-exempt up to Rs 1.5 lakh. If the premiums exceed Rs 2.5 lakh, the returns are not tax-exempt.

A few more tax-saving investment options are listed below:

  • Life insurance premiums for your spouse, children, and yourself
  • Home loan principal repayment amount
  • Five-year bank fixed deposits
  • Five-year Post Office Time Deposit (POTD) schemes
  • Employee Provident Fund (EPF) or Voluntary Provident Fund (VPF) schemes
  • National Bank for Agriculture and Rural Development (NABARD) rural bonds

Conclusion

Today, there are many tax-saving investment options in which you can invest based on your risk profile and asset allocation. You need to select an ideal investment option for a specific tenure considering your financial goals. Use your discretion to choose tax-saving schemes that best fit your financial conditions and goals.

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