Tax season is here, and it is natural to think of ways to reduce your tax burden. No one wants to part ways with one’s hard-earned money. However, one needs to make sure that the ways you resort to are legal. This would require some research and consultation. So, to make your work easier, here’s OneInsure to take you through a list of investment options under Section 80C of the Income Tax Act, through which you can reduce your tax burden. The following list is divided into 2 categories – the first category being investments while the second consists of certain payments against which you can claim tax deduction under Section 80C.
Note: Under Section 80C, you can claim a maximum of ₹1,50,000 tax deduction.
#1 – Equity-linked Savings Scheme (ELSS) Funds
ELSS stands for Equity Linked Savings Scheme. This is like mutual funds and has equity and debt exposure. Putting your money in ELSS funds means that a majority of your portfolio is being invested in the stock market. You can claim a maximum of ₹1,50,000 (inclusive of other investments and payments made under 80C) tax deduction by way of investments in ELSS funds. These funds have a lock-in period of 3 years.
#2 – Public Provident Fund (PPF)
The contributions made towards your PPF account, where you can deposit a maximum of ₹1,50,000 in a year, are also eligible for tax deduction. You can claim up to ₹1,50,000 tax deduction (inclusive of other investments and payments) under Section 80C.
#3 – Employee Provident Fund (EPF)
Any organization whose workforce exceeds 20 employees is liable to register with the EPFO, that is, the Employees Provident Fund Organization of India. Under this, salaried employees make their contribution to the EPF account (which is 12% of their basic salary). This works like a savings account that comes in handy in the event of uncertainties. A maximum of ₹1,50,000 tax deduction (inclusive of other investments and payments) is allowed against this fund under Section 80C.
#4 – Tax-saving Fixed Deposits (FD)
Resident individuals and HUF can claim a maximum deduction of ₹1,50,000 (inclusive of other investments and payments made under 80C) in a year by way of tax-saving Fixed Deposits. However, FDs have a lock-in period of 5 years and thus premature withdrawals or loan against these funds cannot be applied for.
#5 – Unit-linked Insurance Plans (ULIP)
ULIPs are a combination of insurance and investment plans. While a portion of the invested amount is utilized to provide insurance, the rest is invested in the stock market. The amount invested under ULIP plans is eligible for tax deductions under Section 80C. You can avail a maximum of ₹1,50,000 tax deduction (inclusive of other investments and payments made under 80C).
#6 – Life Insurance Premiums
Premiums paid under a life insurance policy is eligible for tax deduction under Section 80C. However, one must note that the deduction is allowed only if the premium paid is less than 10% of the Sum Assured. The total claimed deduction including deductions claimed under any other investments and payments covered under 80C cannot exceed the overall bracket of ₹1,50,000 for this section. Compare Life Insurance Plans
#7 – National Savings Scheme (NSC)
NSCs are another Government-backed savings instruments. The contribution made towards NSCs is eligible for deductions under Section 80C up to a maximum amount of ₹1,50,000 (inclusive of other investments and payments made under 80C).
#8 – Senior Citizens Savings Scheme (SCSS)
The contribution made towards Senior Citizens Savings Schemes is eligible for tax deduction under Section 80C. You can claim a maximum deduction of ₹1,50,000, which is inclusive of other investments and payments made under Section 80C. Note also that the interest earned from this contribution is taxable.
#9 – Sukanya Samriddhi Yojana
Contributions made towards Sukanya Samriddhi Yojana, which is designed to provide for the girl child’s education and marriage, qualify for tax deduction under section 80C. A maximum of ₹1,50,000 (inclusive of other investments and payments made under 80C) is allowed.
Other Payments Eligible for Deduction under Section 80C
#1 – Home Loan Repayment of the Principal Amount
The principal amount paid against a loan taken either to buy or construct a residential property is eligible for tax deduction under Section 80C of the Income Tax Act. The maximum amount that you can claim for deduction is ₹1,50,000. However, one must also note that the property bought against which such benefit has been received cannot be sold within at least five years of possession. In case a sale has been made, the earlier claimed deduction will be added back to the income of the year in which such sale has been made.
#2 – Kids’ Tuition Fees
Under Section 80C, the payment of tuition fees for a maximum of 2 children is eligible for tax deduction up to ₹1,50,000 (inclusive of other investments and payments made under 80C). One must, however, also note that such payment of fees has to be for a full-time course and the educational institute to which it is paid has to be situated in India only.
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