Best investment to save tax under section 80(C).
Now its a trend in India for every investor to search out best investment schemes that can help to save tax also along with investment. Here in this article you can learn best investment under section 80(C).
To save tax in India, the most commonly used section is 80(C).
Income Tax of India allows tax benefit under this section on gross income of up to 1,50,000 per year.
This benefit can be taken by salaried individuals, self employed, businessman or any other tax payer of any category.
Under Section 80(C), Tax deduction is allowed for some specific investment instrument from total taxable income.
There are various investment instrument is there to get the benefit of section 80(C).
Here is top investment option that can help to find out best investment under section 80(C)
1. ELSS-Equity Linked Mutual Fund.
This is one of the best option to claim tax benefit as well as capital gain on your investment. Its a mutual fund investment where you can get tax benefit under Section 80(C) of Income Tax of India. There are lots of mutual fund schemes available in India but you will not get tax benefit in all mutual fund scheme.
Equity link mutual fund is having a lock in period of 3 years. You can not withdraw funds before 3 years from the date of investment.
In this scheme, money is invested in equity and equity related products. You can expect a good return over a long period of time.
As per my experience, If you can take little bit risk on your investment, this is one of the best investment option to save tax and to create wealth in long term.
You can also read more about Mutual Fund .
2. Provident Fund.
This investment also provides tax benefit under 80(C) to the investors.
There are 3 types of provident fund.
Tax benefit for PPF (Public provident fund) has a yearly limit of up to 1.5 lac. Maturity period for PPF is 15 years. PPF gives fixed rate of interest that is fixed by finance ministry. This Year (FY 16-17) rate of interest is fixed 8.1% per annum that is compounded annually. You can not withdraw PPF before maturity period (15 yrs). You can take Loan against of your PPF account. Another benefit with PPF is your maturity amount is also tax free.
EPF (Employee provident fund) is a fund where employee and employer both contributes for the employee. Tax benefit is eligible under section 80C of Income Tax Act. 1961.
VPF (Voluntary Provident fund) where the employee has the freedom to add contribution more than the employer. Tax benefit also applicable under section 80C.
3. Life Insurance.
If you are investing in Life Insurance product, You will be eligible for Tax benefit under Section 80C of Income Tax Act.
Life Insurance Product is a combination of Saving or Investment and Protection to the family of insured person.
There are two types of Life Insurance product.
Traditional Life Insurance policy.
Unit Link Insurance policy (ULIP).
Both products are eligible for Tax benefit. The tax exemption is available on the paid premium for the policy and maximum tax benefit limit is Rs 1.5 Lakh per year.
Tax benefit is applicable if the premium is paid by the life Insured and not applicable if paying by any other family member.
4. Tax Saving Fixed Deposit.
You can save your Tax if you are investing in Tax saving fixed deposit. Remember all the fixed deposit products are not eligible for tax benefit. It is a special deposit schemes offering by most of the banks.
Tax Saving Fixed deposit comes with a lock in period of 5 years and maturity period is 5 to 10 years.
You can invest Rs 1-1.5 lakh as per the products offering by banks.
Here also in this product you can get maximum tax benefit of Rs 1.5 lakh per year.
5. National Saving Certificate.
This is also a good product in terms of safety avenue of investment and Tax benefit.
This product is offering by government of India.
National Saving certificate offers very attractive rate of interest and also tax benefit under section 80C of Income Tax of India.
How NSC can be consider as a best Investment.
- You can get Income Tax benefit of up to Rs 1.5 lakh per year.
- Guaranteed Rate of Interest of 8.1 % Per annum.
- Easily Available in all Post offices in India.
- Maturity period is only 5 years.
- Interest is compounded and auto reinvested.
- No Limit on Investment but remember Tax benefit is capped to maximum 1.5 lakh investment per year.
- Loan facilities available against on NSC certificate.
6. Senior Citizen saving Scheme.
This is a special scheme for seniors citizen offering by government of India.
To invest in this scheme you must attain 60 years of age or can be accepted on 55 if you are retired on this age with sufficient supporting documents
This scheme is easily available in any local banks or post office branches.
You will get very lucrative rate of interest @ 8.6 % per annum.
The Maturity of this scheme is normally 5 years but you can extend for another 3 years.
Minimum investment under this scheme is Rs 1000 and Maximum 15 Lac per account. Only 1 investment is allowed in 1 account.
In case of urgency, You can withdraw fund before maturity. But there is a penalty of 1.5% after 1 year and 1% after 2 years.
Moreover you will get Tax benefit under section 80C of Income Tax of India.
7. Post Office Time Deposit.
Post office time deposit is a deposit scheme similar to other fixed deposit schemes.
In this account, you can deposit for 1-2-3 or 5 years term.
Interest differs as per the tenure.
Currently for 5 years term, Interest rate is 7.6 % per annum. Interest pays annually but calculates quarterly.
Here also if you are investing in this scheme for minimum 5 years term, you are eligible to save tax of maximum investment amount of 1.5 lakh per year under section 80C of Income Tax Act.
If you want to start to deposit in this scheme, Minimum deposit amount is Rs. 200 and in multiples of Rs. 200 there after. There is no maximum limit of investment in this scheme.
8. Sukanya Samriddhi Account.
This is a special account introduced by government of India in the year 2015.
Here also you can save income tax on up to 1.5 lakh per year.
This account you can open if you have girl child.
You can open maximum 1 account per girl child.
To open this account, Minimum deposit per year is Rs. 1000 and maximum 1.5 lakh per year.
There is no limit on number of transaction, subject to minimum Rs. 100 transaction value.
The Current rate of interest is 8.3% per year and it is compounded on yearly basis.
The investment amount under Sukanya Samriddhi Account is eligible under section 80(C) of Income Tax Act.
So, these are the best investment options that not only work as a investment instrument to achieve the short and long term goals of life but also provide tax exemption under the section 80(C) of Income Tax Act.
Here is an outlook for rate of interest, Lock-in period and Risk profile for the above mentioned investment schemes.
|PPF||8.1% (guaranteed)||15 years||Risk-free|
|ELSS||12% to 20% (expected)||3 Years||Market-related risks|
|Life Insurance||3% to 6% (Expected)||3 Years but return expected in long term||Risk - free|
|ULIP (Life Insurance)||6% to 12% (Expected)||5 years||Market-related risks|
|Fixed deposit||6% to 9% (guaranteed)||5 years||Risk-free|
|NSC||8.1% (guaranteed)||5 years||Risk-free|
|Senior Citizen Saving||8.6%(guaranteed)||5 years||Risk-free|
|Post Office Deposit||7.6%(guaranteed)||5 years||Risk-free|
|Sukanya Samriddhi||8.3%(guaranteed)||8 Years subject to entry age||Risk-free|