Did you consume your 80C tax saving bracket 100% to get the maximum tax deduction up to Rs 45,000? Yes, if you are in the 30% slab of income tax then you can easily invest in any of the schemes mentioned under section 80C and save huge tax in a year. Section 80C is the most popular tax saving option in India with couple of popular investment products. In this article I will be sharing the details of each investment product and how much one can get tax exemption by availing these instruments under section 80C.
- 1 List of Popular 80C Tax Saving Investment Options in India 2017
- 1.1 5 Year Time Deposit Under Post Office
- 1.2 Life Insurance Policy Premium
- 1.3 5 Years National Savings Certificate (VIII Issue)
- 1.4 PPF or Public Provident Fund
- 1.5 Sukanya Samriddhi Account
- 1.6 5 Year Bank Fixed Deposit Scheme
- 1.7 Tuition Fees of Children education
- 1.8 Ulip Plans or Unit Linked Insurance Plan:
- 1.9 Units of Mutual Funds / ELSS Scheme
- 1.10 Home Loan Principle Payment
- 1.11 Stamp Duty, registration charges of new house
- 2 How To Choose The Best 80c Tax Saving Options & Save Maximum Tax?
List of Popular 80C Tax Saving Investment Options in India 2017
Here is the list of popular 80C investment options. So many products has been included in this section, but the maximum limit is still kept 1.5 lakh. It was expected that Fm may take a look at this section and may increase the limit up to 2 lakh on this budget 2017. But, this has not happen this time. Let’s hope for the next budget. 🙂
5 Year Time Deposit Under Post Office
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 5 year post office term deposit is 7.8%. This is good for a low risk investor as one can get a guaranteed return after 5 years.
Life Insurance Policy Premium
You might have watched many people are buying life insurance policies at the end of every financial year to save quick taxes. Yes, the premium paid for your insurance policy is also tax exempted under section 80c. Generally that’s why people find single premium payment policies like endowment plan, ULIP plans, Annutiy plans, Pension plans attractive as they save income tax by investing quickly.
5 Years National Savings Certificate (VIII Issue)
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, in fact more than double in 10 years, but right now I can see only the 5 Years National Savings Certificate (VIII Issue) on post office website. The current interest rate of NSC is 8.0% compounded annually. If you invest Rs 100/- grows to INR 146.93 after 5 years.
PPF or Public Provident Fund
PPF is without any doubt the best investment tool 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 is 8.1%, which is regularly reviewed quarterly basis. You can read the complete details about PPF.
Sukanya Samriddhi Account
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.
5 Year Bank Fixed Deposit Scheme
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, other wise 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.
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.
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.
Units of Mutual Funds / ELSS Scheme
This is the best one out of all of the 80C investment options. ELSS or equity linked mutual funds are good way to start investing stock market. There are several top performing tax saving mutual funds which I have shared already. Personally I have also invested in Axis LT mutual Fund to get tax exemption under section 80C.
Home Loan Principle Payment
If you have taken home loan, then you can claim the principle repaid in the financial under section 80C and get tax benefit. You have to take the tax statement of your housing loan from the bank and then submit the same for proof of payment of principle amount. The same document will also work when you claim interest paid for home loan under section 24.
Stamp Duty, registration charges of new house
You can also get tax exemptions for Stamp Duty, registration charges paid while buying your new flat or property.
Besides that you can also show Subscription to any notified securities/notified deposits scheme. e.g. NSS under section 80C and get tax exemption.
How To Choose The Best 80c Tax Saving Options & Save Maximum Tax?
Well, I think the best product among all these listed one’s under section 80C is PPF account & ELSS Schemes. 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 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], if you are confused where to invest, till the time you come up with your plan of investment. Thanks for reading this article. You can share your thoughts here by writing a comment below.