Section 80C of Income Tax Act, 1961 is one the foremost section which people prefer to save their taxes. Section 80C is inclusive of many investments and payments on which person can claim deduction. One can claim maximum deduction under section 80C is 1.5lakhs which assessee can claim every year from his total taxable income.
The deduction under section 80C can be claimed by individual and HUF (Hindu Undivided Family). Apart from these two, no other person can claim deduction under section 80C.
Following are one of the top 10 investments that you can invest in to claim deduction under section 80C;
1. ELSS (Equity Linked Saving Scheme)
· ELSS funds are basically equity funds which invests their major portion in equity or equity related instruments only.
· 3 years is lock-in periodunder this scheme, afterwards the returns received from this investment will be considered as Long Term Capital Gain and eventually the liability will be lesser.
· If the income earned under this scheme is above Rs. 1 Lakh then it will be taxed at the rate of 10% per annum.
2. ULIP (Unit Linked Insurance Plans)
ULIPs are consist of insurance and investment. Under this scheme, funds are invested in insurance as well as in stock markets.
Following must take into consideration while investing in ULIPs;
· An investor can claim deduction only if he buys ULIPs for self or spouse or children.
· The returns under ULIPs varies between 12% - 14% per annum.
· There is no limit on maximum contribution under ULIPs but can claim deduction upto Rs 1.5 Lakhs u/s 80C.
· The returns out of the maturity are exempt under section 10(10D).
3. Public Provident Fund
PPF is a long-term investment plan which one can opt to receive benefits in future. Take following points into consideration to know more about it;
· The deduction under this can be claimed by Indian Resident Individual only who could be either salaries or non-salaried person.
· A HUF cannot open PPF account.
· Currently the rate interest of PPF is 8% per annum.
· The interest earned under this scheme is not taxable under income tax.
· The PPF account has lock in period of 15 years and can be further increased by 5 years but partial withdrawals are allowed after 7years.
4. EPF (Employee Provident Fund)
· Only salaried employees can take benefit of this scheme. This is a one kind of retirement benefit given to salaried employees.
· In this, the amount is transferred by Employer at rate of 12% of basic pay plus dearness allowance.
· The benefit of this scheme can be taken by only that employee who has worked for 5 years or more in the organisation.
· An Employee whose basic pay is more than Rs. 15000 per month is eligible to open PPF account.
· Entire Provident Fund’s balance is tax-free if withdrawn from account after continuous period of 5 years.
5.NPS (National Pension Scheme)
One of the best investment scheme for tax saving is National Pension Scheme (NPS). Refer below image to know the applicability of National Pension scheme;
6.Tax Saving Fixed Deposit
· Tax Saving Fixed Deposits are fixed deposit schemes offered by banks and post offices which allows deduction under section 80C.
· These FD’s have a lock in period of 5 years.
· Though, the returns earned via these FD’s are liable for taxes.
7.National Saving Certificate
· National Saving Certificate is a\ fixed return scheme issued by post offices.
· This scheme is issued by government to give secured returns to small to mid-level investors.
· This certificate provides a fixed rate of returns to investors, currently the fixed rate of return is 6.85% per annum.
8.Life Insurance Premium
· A person can claim deduction under section 80C on annual premium paid on insurance policies.
· A person can claim deduction for himself, spouse, children,
· The deduction is valid only if the amount of premium is less than the rate of 10% of the sum assured.
9. Sukanya Samriddhi Yojana
· This scheme or yojana is issued by Government for the betterment of the girl child in India.
· Parents or guardians can open an account in the name of a girl child till she attains the age of 10 years.
· The rate of interest on Sukanya Samriddhi Yojana is 8.5% per annum.
· The person can do maximum investment under this scheme is Rs. 1.5 lakhs.
· Each return under this scheme is tax-free.
10.SCSS (Senior Citizens Savings Scheme)
· Senior Citizens Savings Scheme is a government-backed savings instrument offered to an Indian resident whose age is 60 years or more.
· The maturity period of the deposit is 5 years, but it can also increase by additional period of 3 years at once.
· The SCSS interest rate for April to June 2020 has been set at 7.4%. This is the highest interest rate among the various small savings schemes in India.
· This scheme is available through Public / Private sector banks and India Post Offices.
There are many deductions available under section 80C but above 10 are one of the prominent deductions available under section 80C. An individual or HUF, altogether can claim maximum deduction of Rs. 1.5 Lakhs under section 80C.