We list the popular tax saving options that can you can make under Sec 80C this financial year.
Every year, both salaried and businesspersons face a mad scramble for filing their taxes by March 31. They realise that their investments are falling short of the requisite tax slabs. So they may make last-minute investments to meet the shortfall.
A better approach is to explore tax saving options beforehand, so as to make a better choice of instruments that align with your goals. Consider the following 5 tax saving investments under Sec 80C of the Income Tax Act, 1961:
1 Tax saving mutual funds. The most popular tax saving mutual fund under 80C is the ELSS, or the Equity Linked Saving Scheme. The ELSS has the lowest lock-in period of just 3 years. You may stay invested for a period longer than 3 years, however. It continues to deliver higher returns than other tax saving investments like FDs or RDs over the years. Do note that the interest earning on it may be partially taxed. As with other investments in mutual fund under 80C, you are advised to buy the ELSS based on other market-linked options you may have already explored.
2 PPF. The PPF (Public Provident Fund) is also a popular tax saving investment in India. You may invest as little as Rs 500 in it per year. It is one of the most affordable investment instruments for all, from students to retired persons. It pays an annual interest of 7.6% at the moment, and has a lock-in period of 7 years. After the lock-in period has elapsed, you may make partial withdrawals against the fund already deposited. The PPF matures at 15 years, when the entire corpus is returned to your bank account.
3 Tax saving FDs. A popular tax saving investment is the 5-year tax saving FD. The minimum investment allowed by banks and financial institutions in this FD is Rs 1,000. You cannot liquidate the FD before 5 years are up. Most banks offer interest in the range of 5.5% to 7.75% on this FD.
4 NPS. The NPS (National Pension System) allows those in the unorganised sector and working professionals or self-employed persons to get a pension after they retire. You can invest up to Rs 1,50,000 to avail of tax benefits under Sec 80C. The current NPS rate is between 12% and 14%, and you can partially withdraw against the fund after 15 years have elapsed.
5 ULIPs. The ULIP (Unit Linked Insurance Plan) is a life insurance policy that also offers market exposure. You can buy the ULIP for yourself, or your spouse, or even your child. It offers excellent returns over a longer time frame, and you get tax deductions up to Rs 1.5 lakh per year. There is no tax on the maturity amount.