In this post, we will study about 80C deduction or 80C investment options. we will see that how we can save income tax up to 150000 under 80C investment. What is an 80C deduction? What are the benefits of 80C investments? We will understand everything related to Income tax under the 80C deduction.
What is an 80C deduction?
What Income Tax 80C say?
Income Tax 80C says that every individual in India can save up to INR 150000 by investing under the 80C income tax.
If you are an employee somewhere and your income came into the income tax slab, then the first thing you can do is put or invest in the various schemes that fall investment under 80C.
What are the 80C investments option?
There are so many options available for 80C investment where you can invest your money and get the tax-free amount from it. We will study and understand each option in detail.
1. PF
For a salaried person, the Employer or Company deducts this amount from employee salary and that amount comes under 80C deduction.
2. PPF
PPF is a Public Provident fund. Any person whether he or she is a salaried person or a non-salaried person can open a PPF account and get benefits from PPF.
PPF is basically initiated by the Government of India in 1968. The rate of return in PPF is awesome. PPF rate of interest in 2021 is 7.10%. Every year anyone can put the maximum amount in his/her PPF account is 150000 RS or monthly can put 12500 Rs.
In PPF, when you will invest money you will get a tax rebate on that amount as well you will also get tax free maturity amount (means when your investment period will over you will get the amount that will all tax free, you need not pay a single penny to Government).
Benefits of PPF
- Risk-free income.
- Higher rate of return than other investment plans.
- Tax rebate on investing money
- Tax-free maturity income
- Huge corpus amount on the maturity
PPF could be a much better option for you to invest money. It will not only save your money although it will create a big corpus for you.
3. Housing Loan Principal amount (including Stamp Duty & Registration Charges, if any)
If you pay a home loan, then the home loan principal amount you can declare under 80C investments and get easily an Income tax rebate on that amount every year.
Before declaring for the housing loan under 80C, the registry should be in your name else you will not eligible.
Stamp duty & Registration charges can also be considered under 80C Tax exemption, But this amount can be declared once only in that financial year in which the house was purchased.
How much we can declare under the Housing Loan Principle
As we know we can claim only 150,000 under 80C, so here also we can claim housing loan principal amount up to 150,000.
4. Tax saving Mutual funds
Mutual funds are popular. Do you know Mutual funds also provide tax-saving features?
There are Mutual funds where you can park your money and can that money fall into deduction under the 80C investments category. These Mutual funds are called ELSS funds
ELSS Mutual funds come with 3 year lock-in period. You can not withdraw money unless 3-year completion.
There are so many ELSS Mutual funds in the market. You can do some research about these ELSS mutual funds because every ELSS fund has a different rate of return in the market.
So, before investing in any type of mutual funds, do some researches from your end or take advice from some experts.
ELSS Mutual funds normally provide a higher rate of returns than other types of mutual funds. The only drawback is its lock-in period of 3 years.
If you are new to Mutual funds and want to know to invest, you can download Groww App or visit https://groww.in. I personally use it.
5. Tax saving FD
A very old and very trustworthy method to save tax on money is Tax Saving FD. You can park your funds in a tax-saving fixed deposit and you can save tax on that amount.
For opening tax-saving FD, you can visit any bank. There is tax saving FD facility in every bank.
Can I open tax saving FD without an opening saving account?
Absolutely yes, you can open tax saving FD without an opening saving account. Some Banks provide you this facility. In this case, Bank just needs any KYC (Know your customer) document and that’s it.
KYC documents could be your PAN card, Aadhar card, etc.
How to open tax-saving FD?
You can open tax-saving FD either offline or Online. If you have an account in any bank and you have a net banking facility then you can open a tax-saving FD online in few minutes.
If you don’t have a net banking facility or you don’t have an account in that bank, in that case, you can visit the bank and open it.
What is the interest rate on Tax saving FD?
Nowadays, the Government has reduced the interest rate on FD, although you will get a higher interest rate than normal FD.
Generally, you will get more than 5.30% FD interest in big banks like HDFC, Axis bank, etc.
Is there any lock-in period in Tax saver FD?
Yes, there is 5 year Lock-in period in tax-saving FD. You cannot break or withdraw money before that.
6. Unit Linked Insurance plan (ULIP)
Unit Linked Insurance Plan or ULIP could be anyone’s first choice to invest money. Investment in ULIP also comes under 80c deductions.
In ULIP there are two portions. One portion of your ULIP investment is used to cover health insurance while the other part is invested in funds.
All amount paid in ULIP is fully tax exempted up to Rs 1.5 lakh. There are so many ULIP options available in the market that you can choose according to your choice.
7. Sukanya Samridhi Yojna (SSY)
- Sukanya Samridhi Yojna (SSY) was started in 2015 by our Prime Minister Sh. Narendra Modi. This scheme is for a girl child. One person who has a daughter can take the benefits of Sukanya Samridhi Yojna.
- All the money invested in Sukanya Samridhi Yojna will be tax exempted under income tax 80C up to Rs 150,000.
- The tenure of Sukanya Samridhi Yojna is 21 years or until a girl marries after 18 years of age.
Interest rate of Sukanya Samridhi Yojna (SSY): Current rate of Sukanya Samridhi Yojna is 7.6%.
8. Education Tuition Fees
An individual can claim an income tax rebate under 80c for paying tuition fees for his/her child. Individuals can claim a school fee/college fee or any other type of education fee for 2 children.
So, if you are paying the fee for your children, then you can take a tax rebate up to Rs. 1.5 lakh.
9. Infrastructure Bonds
- Infrastructure bonds are tax-saving bonds provided by the government or government authorized agencies.
- One can claim up to Rs. 20,000 on his taxable income.
- Infrastructure bonds are long-term bonds.
- The Lock-in period of Infrastructure bonds varies from 10 to 20 years. You can not withdraw the amount from these bonds before the maturity period.
10. National Saving Certificate (NSC)
National Saving Certificate also could be the best option to save your income tax under 80C deduction.
NSC is a government scheme that can be availed from the Post office. You have to visit the post office to get National Saving Certificate.
Key features of National Saving Certificate
- NSC can be obtained from the Post office only
- The maturity period is 5 years
- The interest rate of NSC is 5.9%
- There is no maximum limit to invest in National Saving Certificate.
So, there are so many ways to save income tax up to Rs. 1.5 Lakh under 80c investments . You can take any of these and invest money and get a higher return on your money.
