Every earning individual is concerned about tax payment and tax savings. When you go seeking advice on how to save tax, people often throw suggestions that leave you baffled and confused. This chaos may lead you to make poor decisions and end up regretting. Thus, it is vital for you to gather trusted information regarding different investment options that one can consider to save tax. Some of these effective solutions are available under Section 80 C. The Section 80C has now replaced the previously existing Section 88 and has been effective since April, 2006. Discussed below are some of the best investment options under Section 80C that can be used for tax saving purposes:
Life Insurance Premiums
When you pay any amount for the Life Insurance Premium for yourself, your spouse or your children, that amount is include for deduction from tax under Section 80C. Any number of premiums you pay are deductible. However, premium that are being paid by you for your parent(s) or you in-laws will not be available for deduction from tax.
Public Provident Fund
Public Provident Fund is perhaps the best tax saving schemes that promises assured returns. Usually, the maturity period of a Public Provident Fund is 15 years. The minimum and maximum investment limit in PPF is INR 500 and INR 1.5 Lacs a year, respectively. It is important to keep in mind that thought the interest rate is assured, it is not fixed.
Provident Fund and Voluntary Provident Fund
Both, the employee and the employer, contribute to the Provident Fund. The contribution of the employer is exempt from tax and that of the employee is counted towards investment under Section 80c. The Provident Fund is deducted from an employee’s salary automatically. An employee also has the option to make additional contributions via Voluntary Provident Fund.
Equity Linked Savings Scheme
There are some mutual fund schemes that are created specially to offer tax saving opportunities. These are known as Equity Linked Saving Schemes. Whatever investments you make with Equity Linked Saving Schemes are totally deductible under the Section 80C. It is one of the most widely used tax saving investment method.
Registration and Stamp Duty Charges for home
When you purchase a home, you pay an amount for Stamp Duty and then for registration of your home. You can produce these documents as these charges are deductible from tax as per the Section 80C. But you need to do so in the year you have purchased the house.
Home Loan Principle Repayment
When you pay an Equated Monthly Installment for a home loan, it comprise of two components: Principle amount and Interest. This principal amount is deductive from tax under Section 80C. The tax can be saved from interest component as well, however, it qualifies under Section 24. Thus, go through the Income Tax Benefits document carefully to understand how you can save tax via home loan.
Infrastructure Bonds are bonds that are issued not by the government but by the infrastructure companies. Also known as infra bonds, the investment you make in them is fully deductible from your tax as per the Section 80C.
National Savings Certificate
National Savings Certificate is a small 5 year saving instrument that can be used for tax benefit under Section 80C. It is important to note that the interest you receive each year is taxable, however, one can choose to reinvest the interest and hence make more tax savings.
If you are making investments in Pension Funds, then as per the section 80CCC, the amount is deductible from your tax. However, there is a limit on total deduction. This limit is INR 1.5 Lacs.