Do you know these section 80c investment options to save income tax? Do you think buying LIC policies are the best income tax saving option under section 80c? How to choose the best 80c investment scheme to save for long term or short term? Section 80c of income tax act 1961 is the most popular category among all sections. Under this section one can find may options for investment with which one can save more tax. Initially the max limit of section 80c tax exemption was up to 1 lakh, but after last year’s budget it has been increased to 1.5 lakh for FY 2014-15. Not only that, Govt has included few more investment options under section 80c this year. Let’s check out more about section 80c and find out what are the all possible ways to save tax.
Section 80c schemes list for income tax exemption
Section 80c contains a huge list of investment and savings schemes to choose for. By looking at the list you may think that investment limit of 1.5 lakh is very less. Anyway first check out the complete list of section 80c investment schemes below
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- Bank Fixed Deposits schemes (FD) – 5 years block period
- 5 year term deposit scheme in post office
- Any life insurance policy premium paid yearly basis, not only LIC policies
- PF (Provident Fund) and VPF (Voluntary PF)
- PPF (Personal Provident Fund) with any bank of post office
- Home Loan Principle Component
- National Saving Certificate (NSC) for 5 year and 10 year
- Tuition Fee or Education cost for first & second child
- Investment in ELSS (Equity Linked Savings Scheme)
- Stamp duty or registration charges for home
- Infrastructure Bonds popularly called as Infra Bonds
- Senior Citizens Savings Scheme (SCSS)
- Bonds issued by NABARD (National Bank for Agriculture and Rural Development)
- Any ULIP (Unit linked insurance plan) policy
- Investment under Sukanya Samriddhi Account
Do you expect anything more from this budget 2015-16 under 80c income tax act?
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How to choose the best section 80C investment option
Generally the most common investment under section 80c people do is buying an insurance plan. I was really surprised that people are investing more than 1 lakh for ULIP and other insurance policies. Do you really know the importance of insurance in your life? Do you know the difference between insurance and savings scheme?
One can hardly invest 10,000 -15,000 for a pure term insurance plan which will enough to cover his life. Rest amount he/she should invest to earn interest in long term. Now among these all 80c investment options there are few great instrument which can return a good return in long term. But again you have to decide first for how long you want your money to work for you.
Best short term investment options under section 80c
- If your investment horizon is less then you have couple of options to choose form section 80c. Most popular among them are bank FD schemes. In 5 year you can earn a handsome return. But don’t forget that you have to pay tax on maturity. So the net return may be less.
- Similarly one can also buy NSC certificates for 5 year term. These are actually very popular schemes which actually help to create a habit of investment.
- But if you are ready to take little risk then best option would be investing in ELSS mutual funds. They have a lock in period of 3 years and in 4-5 year horizon one can expect a better return.
Best long term investment options under section 80c
Now there are couple of products to invest under section 80c for long term.
- One can increase their VPF amount and enjoy a very good interest from EPF
- Invest regularly in PPF account and enjoy a lump-sum amount after 15 years. The maturity in PPF account is also tax free. This is the best instrument under section 80c if you don’t want to take risk.
- If you have a girl child then there is good news. You can start investing in Sukanya Samriddhi Account and enjoy a maximum interest of 9.1% this year. To know more about SSA you can visit the website here.
Why not to invest in ULIP plans?
ULIP is a mixture of insurance and savings scheme. A product providing double benefit can’t be able to meet one’s actual demand. You should split them and clearly go for dedicated products. Why not a term insurance plan with 1 crore life cover to meet life insurance need? And for investment purpose already mentioned in the previous sections of these articles. I am preparing an article to explain how ULIP plans are eating one premium and why they return less in long run.
How to utilize section 80c in a smart way
Don’t want to stress much on where to invest and what buy? Then check out the section 80c investment options once again. You can find that few our expenses are also get income tax exemption under section 80c.
- If you buy a house by taking a home loan then you can declare your annual principle amount paid under section 80c. Off course you can also declare your stamp duty charges paid for that house. Anyway this is an online time investment only.
- Education cost has risen like anything in last couple of years. In fact school fee from pre-primary is also in lakh these days. In that case you can plan for a good school and get tax exemption on the entire school fee paid for your children.
If you are in 30% income tax bracket then with the help of section 80c investment options one can save max 45,000 (considering complete 1.5 lakh exhausted). In that case these investment schemes would return much more after considering inflation. Often these investments are criticized by experts as they are not able to beat inflation in long run. But if you want a guaranteed return with taking any risk then section 80c investment options are the best product one can choose from. What do you think about these schemes? Which is your favorite section 80c investment option? Share your feedback and query by writing a comment below.