Section 80 C: Best Tax Saving Investment option under Sec 80C

1) ELSS Fund or Tax Saving Mutual Fund

This is considered as the best tax-saving option. These funds are specially designed to give you dual benefit of saving taxes and getting higher returns on investment.

Eligibility : Can be opened by Resident Indian individuals.

Liquidity: ELSS has lock-in period of 3 years.

Rate of Interest: ELSS interest rate across different banks ranges from 10 % to 15 %

Investment Limit: Minimum investment limit is Rs 1000.

Tax Treatment: Interest earned is partially taxable.

2) Investments in Tax Saving FDs

Tax-saving FDs are like regular fixed deposits but come with a lock-in period of 5 years and tax break under Section 80C on investments of up to Rs 1.5 lakh.

Eligibility: Can be opened by Resident Indian individuals.

Liquidity: Fixed Deposits have lock-in period of 5 years.

Rate of Interest: FD interest rate across different banks ranges from 5.5% to 7.75%

Investment Limit: Minimum investment limit is Rs 1000.

Tax Treatment: Interest earned is taxable.

3) Investments in PPF (Public Provident Fund)

PPF are long term investments backed by government of India. Deposits made in a PPF account are eligible for tax deductions under Section 80C.

Eligibility : Can be opened by Resident Indian individuals, salaried and non-salaried individuals. A HUF cannot open a PPF account.

Liquidity: PPF account have lock-in period of 15 years, but can be further extended by 5 years. Partial withdrawals are allowed after 7 years.

Rate of Interest : Current interest rate is 8.0% p.a.

Investment Limit: Minimum and maximum investment limit is Rs 500 and Rs 1.5 lakh respectively.

Tax Treatment: Interest earned is tax-free.

4) Investments in EPF (Employee Provident Fund)

EPF is a retirement benefit scheme that is available to all salaried employees. This amounts to 12% of basic salary + DA, which is deducted by an employer and deposited in the EPF or other recognized provident funds.

Eligibility: Can be opened by employee with basic salary greater than 15,000 /month

Liquidity: Can withdraw PF balance after 2 months of leaving job and does not take up employment within two months with an employer covered by PF Act

Rate of Interest : Interest rate on the EPF is 8.55%.

Investment Limit: Both employer and employee have to contribute a minimum 12% of Basic Pay + D.A.

Tax Treatment : Entire PF balance (including interest) is tax-free, if withdrawn after continuous service of 5 years

5) Investments in NPS (National Pension System)

The NPS is a pension scheme that has been started by the Indian Government to allow the unorganised sector and working professionals to have a pension after retirement. Investments of up to Rs 1.5 lakh can be used to avail tax deductions under Section 80C

Eligibility : Can be opened by every Indian citizen between the age of 18 and 60

Liquidity: Partial withdrawals are allowed after 3 years but under special conditions.

Rate of Returns : Returns rate on the NPS varies between 12% – 14%

Investment Limit: No limit on maximum contribution

Tax Treatment: Contributions are tax-free

6) Investments in ULIP (Unit linked Insurance Plans)

ULIPs are a mix of insurance and investment. A part of the invested amount in ULIPs is used to provide insurance and the rest of the amount is invested in the stock markets. Investments of up to Rs 1.5 lakh in ULIPs are eligible for tax breaks under Section 80C

Eligibility : An investor can buy ULIP for self or spouse or child

Liquidity: Interest rate varies as it is market linked

Rate of Returns : Return rate on the ULIP varies between 12% – 14%

Investment Limit: No limit on maximum contribution

Tax Treatment : Investment and withdrawals & maturity amount are tax-free

7) Investments in Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana/Scheme is one of the most popular schemes by the Government of India. The scheme is aimed at the betterment of girl child in the country

Eligibility : Parents/guardians can open an account in the name of a girl child till she attains the age of 10 years

Liquidity: Up to 50% of the deposit amount can be prematurely withdrawn once the girl reaches the age of 18 years

Rate of Interest : Interest rate on Sukanya Samriddhi Yojana is 8.5%

Investment Limit: Investment is limited to maximum Rs.1,50,000 in a financial year

Tax Treatment : Investment and withdrawals & maturity amount are tax-free.

Payments eligible for tax saving deductions under Section 80C

1) Payments in LIC – Life Insurance Premium

The annual premium paid for life insurance in the name of the taxpayer or the taxpayer’s wife and children is an eligible tax-saving payment under Section 80C. The deduction is valid only if the premium is less than 10% of the sum assured.

2) Payments in Children’s tution fees

The tuition fee paid for the education of two children is eligible for tax deduction under Section 80C of up to Rs 1.5 lakh. The fee can be paid to any school, college, university or educational institute situated in India. The fees have to be for a full-time course only.

3) Repayment of Home Loan

The repayment of the principal of a loan taken to buy or construct a residential property is eligible for tax deductions under Section 80C. This deduction is also applicable on stamp duty, registration fees and transfer expenses.

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