Wise tax planning is key to profit enhancement for a business and also for an individual taxpayer. The Income Tax Act offers numerous ways for tax savings under Section 88 out of which, Section 80C is the best option.
Section 80C
Section 80C came into force in 2005 which offers maximum savings of Rs. 1,50,000. You can get this deduction by making several types of investments, payments or expenditures, as specified in the Act. These are among the best investment tools which fetch tax savings under 80C
Investments under Section 80C
Here is a list of all the types of savings, investments and expenditures which can make you eligible for tax deduction under Section 80C
• Savings:
- Employment Provident Fund (EPF)
- Infrastructure bonds
- Life insurance premium
- National savings certificate
- Public Provident Fund (PP F)
- Senior Citizens Savings Scheme
- SukanyaSamriddhiYojana (SSY)
- 5 Years Tax Savings Fixed Deposits
• Investment:
- Equity Linked Saving Scheme (ELS S)
- National Pension Scheme (NPS)
- Unit Linked Insurance Plans (ULIPs)
• Expenditure:
- Children School/college Tuition fees
Best Tax Saving Schemes under Section 80C
The selection of the best savings scheme depends upon the features of the plan and your best fit. Out of many features, the most important ones to consider while making this decision could be the risk factor involved or safety of the funds, return on investment and the lock-in period. On this basis, we can consider the following four as the best investment schemes under Section 80C. All give an excellent return on investment, have zero risks or 100% security of the funds, and have a five year lock-in period, (except one scheme).
1. Tax Savings fixed Deposits:
It is a fixed deposit with a lock-in period of five years. The principal amount gets exemption under Section 80C up to the maximum of Rs. 150,000. The interest rate varies from one to the other lender, but the highest fixed deposit interest rate is generally 9%. It is 100% secure and offers compounded interest.
2. Public Provident Fund:
It is an investment tool from the Government of India. It is a combo of investment and savings and is a prevalent tax saving investment option. It is 100% risk-free, has a lock-in period of 15 years, and an interest rate of 7.9% is currently applicable to all the investments in this scheme.
3. National Savings Certificate:
Investment in National Saving Certificate scheme allows tax exemption only for the financial year in which you purchase them. The plan has a lock-in period of five years and offers 8% interest rate with 100% security of the funds.
4. Senior Citizens Saving scheme
It is a savings scheme, especially for senior citizens. The lock-in period of the scheme is five years, the interest rate applicable is around 7.5%, and the funds enjoy 100% security.
Making the right selection of tax saving investment tool at the right time can help you increase your profit and funds.
