About Section 80C
Section 80C of the Income Tax Act 1961, allows the taxpayer to take deductions up to Rs.1.5 lakh p.a. Under the section, individuals can invest in a number of savings schemes to claim deductions on their taxable income by 46800/-.Section 80C of the Income Tax Act 1961, came into effect on 1 April 2006. It allows certain investments and expenditures to be exempt from tax. If you plan your investments well and spread them effectively across various investments such as ELSS, PPF, NSC, Tax Saving FDs, etc. you can claim deductions up to Rs.1.5 lakh, thereby lowering your tax liability by 46800/-.
Best Tax Saving Investment option under Section 80C
Here are the best investments you can make to save tax under Section 80C of the Income Tax Act 1961:
- Equity Linked Saving Scheme (ELSS):
It is a category of mutual fund which helps taxpayer to save taxes. ELSS fund comes under the equity category (open-ended). ELSS has the lowest lock-in period of 3Years, as compared to other tax saving options. ELSS offers the dual advantage of tax saving as well as Capital appreciation. - Provident Fund (PF):
Provident Fund (PF) is automatically deducted from your monthly salary. and deposited into your PF account by your employer with the same amount of his contribution. but only the contribution made by the employee is allowed as a deduction under Section 80C. The employee is also allowed to make a voluntary contribution toward the provident fund (VPF) it is also eligible for Deduction under Section 80C. - Public Provident Fund (PPF):
Public Provident Fund is Popular among individuals as it offers assured returns. interest offer is 7.9%p.a (w.e.f 1st Jan 2020) compounded annually. maturity period is of 15yrs and can be extended every 5yrs. The minimum amount to be invested Rs 500 and the maximum amount of investment are 1.5lakh per annum. maturity is tax-free under section 10(11) of the Income-tax Act 1961. - Tax Saving Fixed Deposit
Tax Saving Fixed Deposit is a normal Fixed deposit but comes with a lockin period of 5years. rate of interest offer is 6.5% to 7.5%. but interest earned is taxable under income from other sources.
I strongly recommended the above 4 investment options after if any to fill the gap left after Home loan principal repayment and Child School fees. some other investment options available under section 80C are Insurance Premium, Unit-linked Insurance plan, but I don't recommend an investment plan in insurance, one should go for a term plan for insurance your life
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