Taxes are an integral part of every earning person’s life. Whether it’s earning an income, making a purchase, owning a property; everything is taxable. Hence, to reduce the burden of the taxpayers, the government of India has made several provisions under the Income Tax Act. When one thinks about tax saving investments, Section 80C is the first thing that pops into the mind. It is the most commonly used section due to the various tax saving schemes listed under it. The various tax saving investment options under this section include:
- Public provident funds: – PPF or Public provident fund is perhaps the most beneficial investment option under the section 80C. Interest earned from PPF is fully exempt from tax without any limit. The PPF offers investors a lot of flexibility. A maximum investment of Rs1.5 lakh can be done in a year. It can be paid in the form of lump sums or as instalments at any given point of time. However a PPF account is valid for a term of 15 years. The entire balance can be withdrawn on maturity i.e. after 15 years.
- Life Insurance: – Life insurance policy holders are eligible for tax benefits under Section 80C. Life insurance is an effective tax planning instrument. The Maximum deduction that can be claimed under a life insurance policy is Rs 1.5 lakhs. Moreover, the proceeds from the maturity/death is completely tax free. However, in case of surrender or untimely withdrawal the claim amount will be subjected to taxation. Plans such as iGuarantee offer the best life cover, along with investment benefit while taking care of taxation.
- Equity Linked Savings Scheme: – Equity Linked Savings Scheme or ELSS are market linked mutual funds wherein investors can enjoy the benefits of capital appreciation as well as tax benefits. To be more precise it is a diversified equity mutual fund in which a majority of the corpus is invested in equities. The main advantage of an ELSS scheme is the comparatively shorter lock-in period than the other financial instruments that offer benefit under section 80C. Long-term capital gains and dividends received on these investments are not subject to taxation.
- National Savings Certificate (NSC): Under this scheme one gets exempted from tax by making an investment of up to INR. 100, 000 per year under the Section 80 C of the Income Tax Act of India. The minimum period for this investment scheme is 6 years, post which, one is provided with the entire interest along with the initial capital. These can be purchased from a post office by an adult in his own name or in the name of a minor, a minor, a trust, and two adults jointly.