Do you know What Comes Under 80C Deductions List? Did you just heard about deductions under section 80c and want to know what are the investments under section 80C to get income tax exemption for FY 2017-2018 and AY 2018-2019? I found various common questions related to this like
- Is mutual fund covered under 80c?
- Is SIP is tax free?
- Is PF part of 80c deduction?
- Is HRA comes under 80C?
- Is employer contribution to PF part of 80c?
In this article I will be sharing the possible option of tax saving for any individual under section 80C. But before proceeding further, remember that under section 80C, one can invest maximum of Rs 1.5 lakh only. Although it is expected that during budget 2018-19 Finance Minister may address this long pending issue and increase in 80C limit up to 2 lakh or 2.5 lakh. Let’s see…
What is Section 80c of income tax act
If you are looking for best ways to save tax without taking risk on your investment, then 80C tax saving investments are the safest one where you can invest money and get good return while saving tax as well.
Section 80C is the most popular tax saving option in India with couple of popular investment products. In simple term, there are various investment options mentioned in this section where you have to investment money if you want to get income tax exemptions.
I will be sharing the number of investment opportunities under section 80C where you can invest money for tax saving purpose in India. There is a maximum limit of 1.5 lakh, beyond which you can’t get any benefit of tax saving. But that doesn’t mean that you can’t invest money for return.
10 Best Investments options under Section 80C
Here is the list of popular tax saving investments under 80c for FY 2017-2018 and AY 2018-2019. Let’s find out them one by one and understand which one would also suite with your investment requirement.
#1. ELSS Mutual Funds
So, finally if you are still searching for is mutual funds investment is tax free, here I want to address your question. Only investment in ELSS mutual funds are tax exempted. There are various types of mutual funds in the market, but if you invest in any other mutual funds than ELSS you will not get the exemption.
This is the best one out of all of the 80C investment options. ELSS or equity linked savings scheme funds are good way to start investing stock market. There are several Best ELSS Tax Saving Mutual Funds 2018-2019 which I have shared already. Personally I have also invested in Axis LT mutual Fund to get tax exemption under section 80C.
Although there are risks involve in mutual fund investment, but from last 3 years of investment I have seen more than 20% return on investment.
#2. PPF Account or Public Provident Fund
PPF account is without any doubt the best investment option in this category and I am sure that mostly people invest in this product to save taxes and also build huge retirement corpus. The current interest rate has come down to 7.6%, which is regularly reviewed quarterly basis.
Checkout the latest post office small deposit schemes interest rates, where you will find that although PPF account interest rate is going down due to its compounding nature, it is still the best long term investment option in India. And on top of that the maturity is tax free.
So, if you have not opened a PPF account yet, then open a PPF account online with SBI or any other bank or post office and start investing money. Maximum in a financial year you can invest Rs 1.5 lakh, which is enough for section 80C as well.
#3. National Savings Certificates or NSC
National Savings Certificates (NSC) are another popular way to invest your lump-sum money for long term to get tax benefit. In fact it was a popular post office scheme to double the money, but you can only buy such certificates for 5 year term at a fixed interest rates.
The current interest rate of NSC is 7.6% compounded annually. Maturity value of a certificate of INR.100/- purchased on or after 1.10.2016 shall be INR. 146.93 after 5 years.
#4. 5 Year Time Deposit Under The Post Office Time Deposit
You can easily open a 5 year term deposit in your nearest post office and declare the invested value under section 80C to claim tax benefit. Right now the interest rate for 5 year post office term deposit is 7.6%. This is good for a low risk investor as one can get a guaranteed return after 5 years.
#5. Life Insurance/Pension Plan Premium
You might have watched many people are buying life insurance policies at the end of every financial year to save taxes quickly. Yes, the premium paid for your insurance policy is also tax exempted under section 80c. The same rules also apply for pension plans available in market.
Generally that’s why people find single premium payment policies like endowment plan, ULIP plans, Annuity plans, Pension plans attractive as they save income tax by investing quickly.
#6. Sukanya Samriddhi Yojana
SSA is the scheme specially designed for girl child. One can open this account and get income tax benefit for the money deposited, the maximum deposit allowed is Rs 1.5 lakh only. You can find out various queries & details about Sukanya Samriddhi Yojna here.
If you have a daughter and looking for good alternative to PPF account then SSA is definitely a good option. But again you can deposit max 1.5 lakh only in a FY under section 80C for tax benefit. The interest rate for Sukanya Samriddhi Yojana is reviewing in every quarter and so far it has come down drastically.
#7. Sr Citizens’ Savings Scheme
For Senior Citizens this is the best alternative to bank FDs as the interest rate is still high 8.3% which is in fact maximum compared to other small deposit schemes. If you go to a bank to open a fixed deposit for Sr citizen you will hardly get 7.7% interest after latest deduction.
#8. 5 Year Bank Fixed Deposit or Bank FDs
Bank FDs are another popular tax saving instrument which is again good to save tax at the last moment. Make sure that you are asking for 5 year tax saving FD, otherwise there might be a confusion with normal 5 year fixed deposit schemes at Bank. The max limit of such FDs to get tax exemption is up to Rs 1.5 lakh only.
But after several reduction in interest rates in Bank FDs, they are losing their popularity compared to debt mutual funds and other alternative investment options. On top of that TDS plays a negative role here as well.
#9. Tuition Fees of Children education
One can get income tax exemption for the school fees paid for max 2 children individually. That means 4 children for both the parents. You will only get the exemption for tuition fee, not for other fees like development charges, caution deposit, transport fee etc.
E.g. my kid is going to an international school in Hyderabad where I have to pay every year around Rs 1.2 lakh as tuition fee. So, I can straight away declare this entire amount under section 80C for tax exemption.
#10. Ulip Plans or Unit Linked Insurance Plan
ULIP is nothing but an insurance policy only where the money is invested in equity market for better return. This kind of scheme is promising to give good return and at the same time give life insurance coverage also. One can get tax exemption for the premium paid in a year under section 80C.
I have shared few articles on ULIP before which will surely help you to understand these products well.
- ULIP VS Mutual Fund – Which is the Best Investment Product?
- Top 6 ULIP Charges You Must Know Before Investing in ULIP PLans
How To Choose The Best 80c Tax Saving Investment in FY 2017-2018 and AY 2018-2019 & Save Maximum Income Tax?
Well, I think the best product among all these listed one’s under section 80C is PPF account & ELSS Mutual Funds. Why I am saying this is because you can easily deposit the entire 1.5 lakh amount among these 2 product and consume the limit of section 80C, without making the calculation complex, in case you have taken care other investment requirements as per your goal.
In case you have only band-width of investing total 1.5 lakh then better you follow the goal based investment method. E.g. for life insurance need, buy a term insurance plan. For secured debt investment for long term, invest in PPF account. To get good return on investment with the taste of equity, invest in ELSS Mutual Funds.
In my case, I am consuming 80C section mostly by providing my kids tuition fees which is quite high. And remaining balance, I am using PPF account + Insurance premium. This gave me a freedom to invest in equity mutual funds with higher risk and better return for long term.
Personally I don’t like the post office FDs or Bank FDs due to their less interest and lock-in issues. I don’t think one should not bound to go for such products to save tax as there are better alternatives. But, if you are happy to get such moderate & guaranteed return, then I think you can go with that. Sukanya Samriddhi account is another good option, similar to PPF account only for them who have girl child.
Lastly, I want to say that I have seen many of my friends buy insurance policies like endowment policies, money back plans, ULIP plans to save income tax. First of all, one should not plan taxes at the last minute and even if you are doing the same, try to know what are the options available with you compared to insurance policies. Buying a policy now and later realizing the mistake and then surrendering is a complete loss of your money, energy and off-course investment. If you need insurance, then buy term plan first and for return I think bank FDs are better compared to insurance policies.
Anyway, this is my personal view. But I think everyone should at least know what are the available options available under section 80C to save tax up to 1.5 Lakh limit. And then how to invest 1.5 lakh money in different products which will actually help you to achieve your goals.
If you don’t have any goals to invest, then you have to set them up. Investing aimlessly for the sake of tax saving is not actually beneficial at the end. I think rather you can open a savings account with highest interest rates put the money there [at least your money will earn good interest] or go with any of the mentioned investment under section 80C Deductions List FY 2017-2018 and AY 2018-2019 and you can finish your tax saving & investment target peacefully.