Under Section 80C of the Income Tax Act, people have the opportunity to save income tax by investing up to Rs 1.5 lakh in various schemes in a financial year. Most people save tax only by investing in LIC, PPF, etc. But there are many more options where tax can be saved under section 80C by investing. You get an exemption under Section 80C of Income Tax law on many options related to social security schemes or investments. This includes your contribution to EPF, PPF, Sukanya Samriddhi Yojana, NSC, Tax Saving Mutual Fund (ELSS) and Tax Saving FD, etc. You can avail Income Tax rebate under section 80C on savings made through these investment options. In this way, you are entitled to Income Tax exemption on investments up to a total of Rs 1.5 lakh, including premiums for life insurance, etc. Running a family on a limited income is a difficult task. For this reason, many people try to save income tax by investing in tax saving options. Generally, this investment is done according to the convenience of future income tax. Section 80C of Income Tax law is very important in terms of savings.
There are many options in section 80C of the Income Tax Act, in which you can save tax on the amount of up to Rs 1.5 lakh through investment. It is also true that the same investment suggestion cannot be proved right for every person. Because of this, every person chooses investment options according to their circumstances. If a person comes in 30% tax slab of income tax after salary or income from the business, then by investing up to Rs 1.5 lakh in just section 80C of income tax law, he can save Rs 46,350 of tax liability.
Employees Provident Fund
The rupee is deposited in the Employees Provident Fund (EPF) which is deducted 12% of the basic salary of every employee every month. Income tax exemption can be claimed on an amount of up to 1.5 lakh in EPF. 8% interest will be given on the amount deposited in EPF for the financial year 2017-18.
Deposits deposited in PPF account are eligible for tax deduction under Section 80C. For opening an account in PPF, an account can be opened with a minimum of Rs 500 whereas a tax exemption can be claimed by depositing a maximum of Rs 1.5 lakh in an entire financial year. Interest is received every year on the amount deposited in PPF, which is determined by the Ministry of Finance. The interest rate for the financial year 2017-18 is 7.8%. PPF has a tenure of 15 years, after which the withdrawal is tax-free. loan can also be taken on the amount deposited in PPF.
Read More:-SIP – How to Start and Benefits of SIP ?
If the amount deposited in the fixed deposit is kept in the bank in the income tax scheme for 5 years, then that amount is eligible for tax exemption under Section 80C. Tax benefits of up to Rs 1.5 lakh can be earned in it. There is an interest of 7-9% on the deposit amount. However, every bank pays different interests in it. One problem in this is that if you withdraw the deposit after the maturity period, then the amount received as interest is added to the taxable income.
National savings certificate
NSC is used to save tax in the financial year in which they are purchased. Under Section 80c, up to 1.5 lakhs can be invested in NSC to save taxes. NSCs can be purchased from registered post offices but have a maturity period of 5 years. Interest is paid annually, but this interest is taxed. The current interest rate on the NSC for the financial year 2016-17 is 8.1%.
Unit-linked insurance plan
ULIP is a mixture of insurance and investment. A part of the amount invested in ULIP is used to provide insurance and the remaining amount is invested in the stock market. Investments up to Rs 1.5 lakh in ULIP are eligible to save income tax under Section 80C. ULIPs do not offer guaranteed returns because they are equity market-linked products. The disadvantage of ULIPs is that they do not clearly state where the investment has been made and how much money has been deducted for commissions and other expenses.
Sukanya Samriddhi Yojana
In Sukanya Samriddhi Yojana, an account can be opened at any time from the birth of a girl till the age of 10 years. It can be deposited from a minimum of 1000 rupees to a maximum 1.5 lakh rupees every year. Income up to Rs 1.5 lakh is tax-free through this scheme under Section 80 C. The interest rate for the financial year 2016-17 on the Sukanya Samriddhi Yojana has been set at 8.6%. There is no tax on the total interest received at the end of this scheme. This account lasts for 21 years from the date of opening of the account or till the age of the girl is 18 years.
Senior Citizen Savings Scheme
Senior Citizen Savings Scheme (SCSS) is a product of the Government of India. It is one of the safest investment options. Individuals above 60 years of age can open this account. Investments cannot be withdrawn for 5 years under this scheme. The depositor can deposit this and extend it for 3 years. Depositors get 8% – 9% interest in this scheme. Interest received from an investment is not exempt from tax.
Tuition Fee of Children
The amount paid as tuition fees for the education of one or two children is exempt from income tax and you can avail it under Section 80C. If the children are twins, then the third child can also get the benefit. Keep in mind that only the fees paid in India come under its purview.
You are eligible for exemption under Section 80C of Principal Repayment of Home Loan. If you have bought a new house and taken a home loan for that, then you can take advantage of it in Section 80C. It is to be noted here that the Equated Monthly Installment (EMI) of a home loan has two components – “principal” and “interest”. You will get exemption under Section 80C only for the amount of principal share. The interest portion is also eligible for income tax exemption but not under 80C, which is under section 24.
In this way, you can save income tax by the methods given above. It is important to keep in mind here that the government gives a discount on investing money in all these mediums so that the trend of saving and investment can be promoted among the people. This type of investment can reduce the risk of people and at the same time increase the flow of money in the economy, which will be helpful in meeting the financial shortage in important sectors.
Know More About Business Post