Every year, thousands of individuals struggle to save taxes. You can determine the taxable amount according to the income tax slabs, categorized as per your gross earnings. You, as a taxpayer, can calculate the amount of tax you need to pay using a simple income tax calculator. Though the income tax can burn a hole in your pocket, you can claim certain discounts on the payable tax. You can claim these rebates under certain sections like Section 80C, 80CCC, and 80CCD. Of these, investments under 80C are the most common as it enables you to save up to Rs 1,50,000 of their total taxable income.
What are the tax saving instruments under 80C Deduction?
The deductions under section 80C allow you to claim benefits according to the investments you make throughout a financial year. These deductions help you lower the overall tax liabilities. To know some of the most popular methods or tax saving schemes, read on.
1. Employee Provident Funds (EPF)
EPF is deducted from the salary of any individual having a job with a minimum gross income of Rs. 15,000. You can calculate the amount as 12% of your basic salary, with the organization you work in paying the same amount to the PF account. The employer’s part contributes to the 80C deductions while the employee’s part adds to the investment in PF account and is liable to earn an interest compounded annually.
2. Public Provident Fund (PPF)
You can open a PPF account on your name and it has a maturity period of 15 years. The interest is calculated annually, and you can start investing from an amount as low as Rs. 500. Moreover, you can invest up to a maximum of Rs 1.5 lacs under this category for exemption under 80C. PPF is quite popular, given the fact that they are low risk, have higher returns, and interests earned are tax-free. Additionally, you are eligible for partial withdrawal after seven years from the commencement of the investment.
3. Fixed Deposits (FD)
With no upper limit on investment, you can start your fixed deposit account with a minimum sum of Rs. 1,000, and earn a tax deduction from this scheme. The minimum term of investment should be five years, and you cannot break it before the completion of the time. The interest varies but helps you to earn a decent return after maturity. However, you need to pay TDS on the interest earned from the FD account.
4. National Savings Certificate (NSC)
A highly secure form of investment, NSC comes with an investment lock-in period of 5 years and 10 years. Further, you can get good returns on maturity as well as it is eligible for 80C deductions. Moreover, the maturity amount is not liable to tax. You can claim a maximum of Rs 1.5 lacs under 80C; however, an additional Rs 50,000 can be claimed under 80CCD(1B). The maturity amount is taxable for NPS instruments.
5. Unit Linked Insurance Plans (ULIP)
ULIPs are the insurance plans which combine the benefits of investment and insurance. The premium paid under the policy qualifies for 80C deductions. You can calculate the deductions as 10% of the sum assured or annual premium whichever is lower subject to a ceiling of Rs. 1,50,000. Moreover, the returns are tax-free upon maturity.
6. Equity Linked Savings Scheme
ELSS is one of the fastest methods of growing money while investing, as well as help you to save taxes. It has a lock-in period of three years and comes with a minimum investment value of Rs. 500. If you are a bit of risk-taker, you will find yourself reaping quite a benefit from the scheme since returns are higher compared to the other instruments in this category and it has the lowest lock-in period. You can claim a maximum of Rs 1.5 lacs under 80C for investment in ELSS.
Conclusion
Other than the investments mentioned, you can also claim tax benefits on the home loan principal amount, NABARD Rural bonds, and infrastructure bonds. These investments and expenditures not only allow you to receive tax relief on your hard earned money but also secure your future with high returns on maturity.
