Exemption U/s 80C | Investment under Section 80C has two purposes: first, to make investments, and
second, to save tax. Thus, the tax thus saved and the investments thus made can be used in the future.
Miscellaneous
funds under section 80C
There are several investments under section 80C which allows
the assessee to reduce his tax liability to Rs. 1.5 lac. These investments are
as follows:
Public Provident Fund or PPF Scheme is a long-term investment
scheme backed by the Government of India. Also, one can invest in PPF by
opening an account and making a minimum deposit of Rs. 500 up to a sum of Rs.
1.5 lac. In addition, the PPF scheme has a lock-in period of 15 years and the
current interest rate is 7.1%. In addition, the premium, as well as the
interest amount on the PPF, is tax-free.
Sukanya
Samridhi Yojana
Sukanya Samridhi Yojana or SSY is one of the best performing
investments under section 80C. This is because it is a government initiative
aimed at uplifting the girl child. It was launched in 2015. Thus, a person with
a daughter can open an SSY account with some post offices and banks in
Life
insurance premiums
Life insurance premiums, commonly known as LIC premiums, are
common investments under Section 80C. The reason is that the life insurance
premium not only provides life cover to the individual but also protects his
family and gives them financial independence accordingly. Maximum limit Rs.1.5
Lakh.
Provident fund scheme for employees
The Employees Provident Fund or EPF Scheme is a long-term
retirement scheme available to salaried employees. Under this scheme, the
employer and the employee pay the same premium of 12% of the basic salary plus
severance pay. When an employee retires, the amount so earned, plus interest is
paid directly to the employee. Additionally, the gift is exempt from tax under
section 80C.
5 Years
Tax Savings Fixed Deposits
Tax-saving 5-year fixed deposits are similar to fixed
deposits. Maximum deduction of up to Rs. 1.5 lacs under section 80C in these charge-saving
FDs.
National
Savings Certificate (NSC).
National Savings Certificate or NSC is yet another investment
option under Section 80C backed by the Government of India. Therefore, the
guarantee includes returns. The current interest rate for NSC is 6.80% and it
has a 5-year lock-in period.
Shared
savings plan and link
Equity Linked Savings Scheme or ELSS is an investment fund
that invests at least 80% of its assets in the stock market. These are also
known as tax-saving mutual funds as they can avail deductions under Section
80C. In addition, they have a lock-in period of only 3 years and the return is
dependent on market norms.
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National
pension system
The National Pension Scheme or NPS is a scheme that allows
working professionals and earners in other sectors to benefit from pension
benefits. For example, any Indian between the ages of 18 and 60 can open an NPS
account. Investments up to Rs. 1.5 lakh in this scheme are eligible for tax
deduction under Section 80C of the Income Tax Act. Apart from this, one can
also get some tax rebates on investments of Rs. 50,000 under Section 80CCD
(1B). The lock-in period is also up to retirement age and the current interest
rate is 7.10%.
Unit Lien
Insurance Plans
Unit Linked Insurance Plans or ULIPs are effective
investments under Section 80C that provide investors with investment and
insurance in one package. According to ULIPs, part of the investment is in life
insurance, and the rest is in equity, debt, or a combination of both.
Thus, under Section 80C, the premium amount of ULIP is tax
deductible up to Rs. 1.5 million per annum. In addition, policy returns at
maturity are exempt from income tax under Section 10(10D).
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