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Best Options Under Section 80C To Save Taxes


VFN Team - May 25, 2018 - 0 comments

A detailed description of how to save your taxes using options provided under Section 80C.

What is 80C deduction?

This deduction is allowed only to Individual or a HUF. Under section 80C, a deduction of total amount of Rs. 1, 50,000 can be claimed from total income so, you can reduce up to 1, 50,000 from your total taxable income through this section.

Save Taxes Under Section 80C

How can you save tax through 80C?

There are various options under this deduction through which you can reduce the tax amount and they are as following:

  1. Investment in ELSS (Equity Linked Saving Scheme)
  • Saving of taxes
  • Returns on the investment
  • Interest earned is tax free
  • Lowest lock in period of 3 years
  • 36% rise in 2017 and expected to grow in future also
  1. Investment in Public Provident Fund (PPF)
    • It gives return of 7.6% p.a.(approx.)
    • Interest earned is tax free
    • PPF account have lock-in period of 15 years, but can be further extended by 5 years. Partial withdrawals are allowed after 7 years.
    • It is backed up by government of India
    • Flexibility and ease of investment
    • There is low risk
  2. Investment in Unit Linked Insurance Plan (ULIP)
    • Interest rate is 9.9% – 11.9% p.a. (approx.)
    • Investment and withdrawals & maturity amount are tax-free
    • Policies have 5 year lock in period for policies bought on and after 1/09/2010
    • ULIPs are a mix of insurance and investment
    • Switching from equity to debt and vice versa doesn’t have any tax on it and income is tax free under section 10(10D).
  3. Investment in Sukanya Samriddhi Yojna
    • Interest rate is 8.6% p.a. (approx.)
    • Investment and withdrawals & maturity amount are tax-free
    • Initial amount is low Rs. 10,000
    • The scheme allows maximum two accounts for one legal guardian
    • The account allows partial withdrawal to fulfil the purpose of higher education or marriage.
    • The scheme has lock-in period of 21 years,
  4. Investment in National Saving Certificate (NSC)
    • Return is 7.6% p.a. (approx.)
    • Invest as small as Rs. 100 (or multiples of 100) as an initial investment and increase the amount when you can.
    •  Upon maturity, you will receive the entire maturity value.
    • There is no TDS on NSC payouts and shall pay the applicable tax on it.
    • This investment is low risk scheme
    • They come with 2 fixed maturity periods – 5 years and 10 years.
  5. Investment in Fixed Deposit (FD)
    • Interest rate is 6.5% p.a. (approx.)
    • Minimum investment limit is Rs. 1000
    • This have lock in period of 5 years
    • There is low risk
    • Interest earned in taxable
  6. Investment in Senior Citizen Saving Scheme
    • Rate of interest is 8.40% p.a. (approx.)
    • Easily available at bank and post office
    • TDS can be saved
    • Can have multiple accounts
    • The tenure of the scheme is 5 years which can be extended to 3 more years
    • Pre mature withdrawal is permissible but only after completion of 1 year and with premature withdrawal charges
  7. Employee Provident Fund
  • Contribution of employer to the EPF Scheme shall be equal to the contribution made by an employee.
  • To avail Exemption, Contribution shall not be more than 12% of the salary of employee.

(Here Salary means Basic Salary + Dearness Allowance)

  • Also Interest on the contribution to EPF shall be exempt up to the rate of 9.5%
  • Amount from the scheme can be refund after the period of 5 years of employment.

Also Accumulated balance including interest shall be exempt, if drawn after the continuous service of 5 years

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