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Best Tax Saving Investment option under Sec 80C

Investment in ELSS Funds or Tax Saving Mutual Funds is considerd as the bese tax saving option. This funds are specially designed to give you dual benefit of savig taxes and getting higher returns on investment.

  • Invest in ELSS and save upto Rs 45,000 in taxes

  • Lowest lockin period of 3 years

  • Higher returns than FD / PPF / NPS

  • Interest earned is tax-free unlike other investments

Investments in Tax Saving FDs

Tax-saving FDs are like regular fixed deposits but come with a lock-in period of 5 years and tax break under Section 80C on investments of up to Rs 1.5 lakh.

Eligibility : Can be opened by Resident Indian individuals.

Liquidity: Fixed Deposits have lock-in period of 5 years.

Rate of Interest : FD interest rateacross different banks ranges from 5.5% to 7.75%

Investment Limit: Minimum investment limit is Rs 1000.

Tax Treatment : Interest earned in taxable.

Investments in PPF (Public Provident Fund)

PPF are long term investments backed by government of India. Deposits made in a PPF account are eligible for tax deductions under Section 80C.

Eligibility : Can be opened by Resident Indian individuals, salaried and non-salaried individuals. A HUF cannot open a PPF account.

Liquidity: PPF account have lock-in period of 15 years, but can be further extended by 5 years. Partial withdrawals are allowed after 7 years.

Rate of Interest : Current interest rate is 7.6% p.a.

Investment Limit: Minimum and maximum investment limit is Rs 500 and Rs 1.5 lakh respectively.

Tax Treatment : Interest earned in tax-free.

Investments in EPF (Employee Provident Fund)

EPF is a retirement benefit scheme that is available to all salaried employees. This amounts to 12% of basic salary + DA, that is deducted by an employer and deposited in the EPF or other recognised provident fund.

Eligibility : Can be opened by employee with basic salary greater than 15,000 /month

Liquidity: Can withdraw PF balance after 2 months of leaving job and does not take up employment within two months with an employer covered by PF Act

Rate of Interest : Interest rate on the EPF is 8.55%.

Investment Limit: Both employer and employee have to contribute a minimum 12% of Basic Pay + D.A.

Tax Treatment : Entire PF balance (including interest) is tax-free if withdrawn after continuous service of 5 years

Investments in NPS (National Pension System)

The NPS is a pension scheme that has been started by the Indian Government to allow the unorganised sector and working professionals to have a pension after retirement. Investments of up to Rs 1.5 lakh can be used to avail tax deductions under Section 80C

Eligibility : Can be opened by every Indian citizen between the age of 18 and 60

Liquidity: Partial withdrawals are allowed after 15 years but under special conditions

Rate of Interest : Interest rate on the NPS varies between 12% – 14%

Investment Limit: No limit on maximum contribution

Tax Treatment : Employer contributions are tax-free

Investments in ULIP (Unit linked Insurance Plans)

ULIPs are a mix of insurance and investment. A part of the invested amount in ULIPs is used to provide insurance and the rest of the amount is invested in the stock markets. Investments of up to Rs 1.5 lakh in ULIPs are eligible for tax breaks under Section 80C

Eligibility : An investor can buy ULIP for self or spouse or child

Liquidity: Interest rate varies as it is market linked

Rate of Interest : Interest rate on the NPS varies between 12% – 14%

Investment Limit: No limit on maximum contribution

Tax Treatment : Investment and withdrawals & maturity amount are tax-free

Investments in Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana/Scheme is one of the most popular scheme by Government of India. The scheme is aimed at betterment of girl child in the country

Eligibility : Parents/guardians can open account in the name of a girl child till she attains the age of 10 years

Liquidity: Up to 50% of the deposit amount can be prematurely withdrawn once the girl reaches the age of 18 years

Rate of Interest : Interest rate on Sukanya Samriddhi Yojana is 8.6%

Investment Limit: Investment is limited to maximum Rs.1,50,000 in a financial year

Tax Treatment : Investment and withdrawals & maturity amount are tax-free

Invest in Tax Saving Funds
Best investment under sec 80c
Lowest lock-in of 3 years
Get 2x better returns than FD/PPF
Invested Amount: Rs 1.5 Lakhs
FD/PPF
Rs 1.85 Lakhs
ELSS Funds
Rs 2.5 Lakhs

Payments eligible for tax saving deductions under Section 80C

Payments in LIC – Life Insurance Premium

The annual premium paid for life insurance in the name of the taxpayer or the taxpayer’s wife and children is an eligible tax-saving payment under Section 80C. The deduction is valid only if the premium is less than 10% of the sum assured.

Payments in Children’s tution fees

The tuition fee paid for the education of two children is eligible for tax deduction under Section 80C of up to Rs 1.5 lakh. The fee can be paid to any school, college, university or educational institute situated in India. The fees have to be for a full-time course only.

Repayment of Home Loan

The repayment of the principal of a loan taken to buy or construct a residential property is eligible for tax deductions under Section 80C. This deduction is also applicable on stamp duty, registration fees and transfer expenses.

Invest in ELSS and Save upto 45,000 in taxes
  • Lowest Lockin of 3 years
  • Option to invest monthly
  • Interest earned are tax-free
  • Higher Interest rates than NPS
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FAQs (Frequently asked Questions)
  • What is Tax Saving FD? Does this come under Sec 80C?
    Tax-saving FDs are like regular fixed deposits, but come with a lock-in period of 5 years and tax break under Section 80C on investments of up to Rs 1.5 lakh. Different banks offer different interest on the tax-saving FDs, which range from 7-9%. The returns are guaranteed and the FDs offer 100% capital protection. But upon maturity, the interest is added to the investor’s taxable income.
  • When is the best time to invest in SIP?
    There is no specific date that can be said to be the best date for an SIP. However, the beginning of the month would be a good time for SIPs as you would receive your salary at that time and would have enough money to invest.
  • Is investment in ULIP comes under Sec 80C? When can i withdraw?
    ULIPs are a mix of insurance and investment. A part of the invested amount in ULIPs is used to provide insurance and the rest of the amount is invested in the stock markets. Investments of up to Rs 1.5 lakh in ULIPs are eligible for tax breaks under Section 80C. ULIPs don’t offer guaranteed returns because they are an equity market-linked product. The disadvantage of ULIPs is that they don’t offer clarity on where the investments are made and how much of the invested amount is deducted for commissions and expenses.
  • What is NSC – National Savings Certificate? Does this come under Sec 80C?
    NSCs are eligible for tax breaks for the financial year in which they are purchased. Investments of up to Rs 1.5 lakh in NSCs can be made to save taxes under Section 80C. NSCs can be bought from designated post offices and come with a lock-in period of 5 years. The interest is compounded annually but is taxable. The current interest rate for FY2016-17 on NSC is 8.1%
  • What is PPF – Public Provident Fund? Does this come under Sec 80C?
    An employee’s contribution to the Employee Provident Fund (EPF) account also earns a tax break under Section 80C of up to Rs 1.5 lakh. This amounts to 12% of salary that is deducted by an employer and deposited in the EPF or other recognised provident fund. The current interest rate on the EPF is 8.8%.
  • What is NPS – National Pension System? Does this come under Sec 80C?
    The NPS is a pension scheme that has been started by the Indian Government to allow the unorganised sector and working professionals to have a pension after retirement. Investments of up to Rs 1.5 lakh can be used to avail tax deductions under Section 80C. An additional Rs 50,000 can also be invested in the NPS for tax deductions under Section 80CCD(1B). The NPS offers different plans that the subscriber can choose as per their risk profile. But the highest exposure to equity is capped at 50%. An option to change designated pension fund managers is also allowed. However, a major disadvantage of the NPS is that the proceeds upon maturity are taxable. Furthermore, there is no guarantee of the returns that can be earned from the NPS.
  • Is investment in Sukanya Samriddhi Yojana comes under Sec 80C? When can i withdraw?
    Deposits of up to Rs 1.5 lakh can be added to a Sukanya Samriddhi Yojana account for tax saving under Section 80C. The current interest rate for FY2016-17 on Sukanya Samriddhi Yojana deposits has been set at 8.6%. Deposits in this scheme have to be made for a girl child by the parent or guardian. The interest is compounded annually and is fully exempt from tax. The receipts upon maturity are also tax-free. The Sukanya Samriddhi Yojana account matures 21 years after opening the account. A partial withdrawal of up to 50% of the previous year’s balance is allowed after the account holder turns 18.
  • What is Senior Citizens Savings Scheme (SCSS)? Does this come under Sec 80C?
    The SCSS is a scheme exclusively for anyone who is over 60 years old or someone over 55 who has opted for retirement. The scheme has a maturity period of 5 years and gives 8.6% per annum. Investments of up to Rs 1.5 lakh in SCSS can be made to save taxes under Section 80C.
  • Why ELSS is considered the best tax saving option?
    ELSS stands for Equity Linked Savings Scheme. These are tax-saving mutual funds that invest at least 65% of their assets in the stock markets. Investments of up to Rs 1.5 lakh in ELSS funds can earn a tax break under Section 80C. The advantage of ELSS funds is that they come with the lowest lock-in among all tax-saving investments–just 3 years. Apart from that, because of their equity exposure, ELSS funds are best placed to help you earn inflation-beating returns over the long-term. Even though these tax-saving mutual funds don’t offer guaranteed returns, the best performing ones have generated 12-15% returns over the long-term through the power of compounding interest. Additionally, since ELSS funds are equity-oriented funds, all gains on investments held for over one year are tax-free for the investor. You can invest in a diversified portfolio of ELSS funds through our investment platform .