Top tax savings investment options under Section 80C in India

Every Indian citizen must pay a certain percentage of their income as a tax to the Government. But under Section 80C of the Income Tax law, you can lessen your tax liability every year. Here come tax-saving investments that play a pivotal role in a person’s life as they embrace you with tax deductions under 80C or 80 CCC. Thus, these days, people are more inclined to invest in various tax-saving schemes.

For both salaried and unwaged taxpayers, the tax-saving session begins from 1st April every year. A person should prudently choose the best tax-saving investments so that apart from tax exclusion, he can also earn tax-free income. These days, the markets are crammed with many tax-saving investment options. But before investing in any tax saving plans, consider some prime factors, including safety, returns, and liquidity. Choosing the best tax-saving investments could be an uphill task because the options are fathomless. Therefore, before selecting the best tax savings in India, you should have an adequate idea about how the returns will be taxed.

Before knowing different types of tax savings investment in India, you should have a comprehensive knowledge of the online income tax Act, i.e., section 80 C. According to this Act, all investors are eligible for a maximum tax exemption of up to 1,50,000 for their investments. Let’s take a look at some of the best tax-savings investment options for every Indian.

8 Best Tax-Saving Investment options under Section 80C in India

You must be worrying about what are tax-saving investments options in India? This blog will give you various tax-saving investments options and tax-saving benefits so that you can make a prudent decision for your life.

1. ELSS (Equity-linked savings scheme) Mutual Fund
2. National Pension Scheme (NPS)
3. ULIP (Unit-linked Insurance plan)
4. Public Provident Fund (PPF)
5. Sukanya Samriddhi Yojana
6. National Savings Certificate
7. Bank Fixed Deposit Scheme Income
8. Insurance Policies

1. ELSS (Equity-linked savings scheme) Mutual Fund

This is the most popular and easy investment plan, where investors can track their investments online without any hassle. This plan has two prime features.

• With this investment scheme, a person is eligible for a maximum tax exemption of up to Rs. 1,50,000 under 80 C Act.
• This scheme offers the lowest locking period of 3 years.

This popular tax saving fund provides returns that are around 15-18% to investors. Depending on the market performance of the fund, the returns will vary.

As per their needs and requirements, the investors can choose either dividend or growth option. The dividends are 10% taxable for an equity scheme from 1st April 2018 onwards. Those with high-risk appetites are the most suitable for this scheme, as it offers flexibility and liquidity in investment.

2. National Pension Scheme (NPS)

This scheme was introduced by the Indian Government for the unorganized sector and working professionals so that they can get a pension after their retirement.

• You can invest up to Rs 1.5 lakh and claim deductions under Section 80C
• You may get an additional deduction of up to 50,000 under 80 CCCD (1b)
• If your employer pays 10% of your basic salary, then the amount is not taxed
• Investment return is between 12-15%
• After 15 years, you can withdraw the amount partially under certain conditions
• At the time of maturity, you will get a tax exemption for only 40% of the amount.

Since NPS is a government-supported scheme, hence it offers safety and transparency during investments. You can start this scheme with a minimum amount (Rs.1000) and then see how it grows within a few years.

3. ULIP (Unit-linked Insurance plan)

This is a mixed insurance and investment plan that offers a good return on investment apart from tax benefits. Here, some portions of the invested amount are used in ULIP; the rest is used in the stock market.

• A person can purchase ULIP for self or spouse or child
• Depending on the market rate, the interest varies
• Return rate varies between 12% – 14%
• This scheme offers tax-free investment, withdrawals, and maturity amounts.
• The lock-in period is 5 years for this investment
• This scheme allows flexible investment options. Now, investors are free to choose the best option from an array of options
• Your return will vary, based on the market performance of the fund.

4. Public Provident Fund (PPF)

Are you looking for the safest yet the best return on investment plan? This popular scheme comes with multifarious features.

• The maturity period for this scheme is 15 years that can be extended for another 5 years.
• Maximum Rs. 1.5 lakh can be tax exempted under this scheme
• After 7 years, you can withdraw partially from your PPF account every year (but the withdrawal amount won’t go beyond 50% of the total)
• Since this is a government-aided scheme, you can start with a minimal amount of Rs.500 and can invest Rs. 1.5 lakh per year.
• You can contribute either in total or monthly (12 installments) as per your wish.

5. Sukanya Samriddhi Yojana

This is particularly designed for women that offer an interest rate of 8.1 % along with tax exemption benefits.

• With this scheme, you are eligible for maximum tax exemption of Ts. 1.5 lakh
• This scheme provides tax-free investments, maturity, and withdrawals
• The minimum entry age for this scheme is 10 years, and it will remain active for 21 years from the account’s opening date.
• The minimal investment is Rs.250, and you can invest up to Rs. 1.5 per year in this scheme.

6. National Savings Certificate

This is a low-risk tax-saving investment option in India that has many resemblances to bank FDs and PPF. This is ideal for min-income groups as it offers a guaranteed return on investment.

• The maximum limit of tax deduction is Rs.1.5 lakh (Under 80C Act)
• Tax exemption is also applied for the earned interest
• At the time of maturity, the investors will receive the entire amount.
• Since there is no TDC, the investors need to pay the applicable tax on the matured amount.

7. Bank Fixed Deposit Scheme Income

If you are looking for the safest and guaranteed return on investments, then bank FDs could be the best choice. These tax-saving FDs offer tax-free income and are ideal for low-risk appetite individuals.

• The tenure period for Bank FDs is 5 years
• The maximum limit of tax deduction is Rs.1.5 lakh (Under 80C Income Tax Act)
• Every bank has a different interest rate for FDs. But this rate can be changed quarterly or yearly.
• This scheme offers the highest earning potential as compared to other savings accounts. Here, you need to pay a hefty amount only one time.

8. Insurance Policies

Life insurance policies are another tax-saving investment option. Though don’t purchase these policies only to save tax, as they offer insurance coverage to the policyholders as well as their family members. You are eligible for tax exemption under sections 80C and 10D of the income tax Act with life insurance policies. The premium and the maturity amount are also tax exempted if you have purchased a life insurance policy. But you are eligible for tax exemption up to Rs. 1.5 lakh under a life insurance policy from a reputed insurance provider.

Post office tax savings schemes under section 80C

Let’s take a look at various post office tax saving schemes under 80 C.

• 5-year post office recurring deposit amount: By paying a fixed monthly amount (minimum Rs.100), you can earn interest at 5.8% p.a. After 12 installments, you can get a loan up to 50% of the deposited amount.
• Post office time deposit amount: You can choose a tenure for 1 year, 2 years, 3 years, and 5 years and your minimum deposited amount would be Rs. 1000.
• Post office monthly income scheme: Under this scheme, you can deposit from Rs.1,000 to Rs.4.5 lakh in a single account. The rate of interest is 6.6% p.a. for this account. In addition, you are eligible for a monthly fixed income from this scheme.
• Senior citizen savings scheme: This scheme is ideal for senior citizens who are 60 years above. The deposit range may vary from Rs.1,000 up to Rs.15 lakh. The rate of interest is 7.4% p.a.

Additional tax savings investment options apart from 80C

Let’s take a look at tax savings other than 80 C options.

• Under the 80 D Act, you can claim a tax deduction of up to Rs. 25,000 for your health insurance premium.
• You can also choose tax savings with home loan investment options. Under 80EE of the Income Tax Act, on home loan interest, you can claim a tax deduction up to Rs.50,000. A home loan is also helpful in lessening your taxable income. You can claim the principal home loan amount up to Rs. 1.5 lakhs under section 80C.

Overall, the above blog must have given you an adequate idea about the advantages of tax savings in India. Now, make a prudent decision by choosing the best tax savings schemes for a scintillating future.