Best Tax-Saving Investments under Section 80C

In this policy, the investment risks in the investment portfolio is borne by the policyholder

Every working Indian must pay taxes and contribute to the nation's development. The Government of India put various checks and measures in place to ensure people do not feel a heavy tax burden. They offer various tax-saving investments to encourage individuals to save for the future while minimising their tax burden today. Various tax-saving investment plans are available under different sections of the Income Tax Act of 1961.

Tax saving options under Section 80C

Let’s look at the best tax-saving plans under Section 80C:

1. Equity Linked Saving Scheme (ELSS)

2. Unit Linked Insurance Plan (ULIP)

3. National System (NPS) 

4. Public Provident Fund (PPF)

5. Fixed Deposit (FD)

6. National Savings Certificate (NSC)

Let’s look at these tax saving investments in detail.

1. Equity Linked Saving Scheme (ELSS)

ELSS, also called tax-saving mutual funds, is a popular tax-saving investment scheme. This scheme offers an annual tax deduction on investments up to INR 1.5 lakh. Another great advantage of ELSS is that the lock-in period is only three years. Many regard the scheme as one of the best investment plans because of its impressive returns. So, if you’re looking for a tax-saving option with a short lock-in period and reasonable returns, ELSS might be the perfect fit.

2. Unit Linked Insurance Plan (ULIP) 

One of the best tax-saving investments, ULIPs provides you with both - investment and insurance. With a ULIP, you can accumulate wealth while getting life insurance at the same time. Under section 80C, the premium paid for ULIP is eligible for a tax deduction. One can avail of tax deductions up to INR 1.5 lakh per year. Additionally, proceeds received on the ULIP maturity are fully exempt from tax subject to provisions mentioned in Section 10(10D). Investing in ULIPs will help you meet your long-term goals like retirement planning, funding your child’s education, and other financial goals. 

3. National Pension System (NPS) 

The National Pension System (NPS) is a scheme that offers the dual benefit of a secure pension and investment opportunities. It provides financial security to individuals post-retirement. Anyone can open an NPS account. Investments made up to INR 1.5 lakh per year are eligible for a tax deduction under section 80C. The NPS is a great option if you’re looking for beneficial tax-saving investments.

4. Public Provident Fund (PPF)

The Public Provident Fund, or PPF, is one of the most popular and common investment schemes. Since the Government of India monitors and runs it, it is considered a safe investment. Under this scheme, you can claim a tax exemption of INR 1.5 lakh per year under section 80C. However, this scheme comes with a lock-in period of 15 years. After 15 years, you can increase the tenure in five-year blocks. Under this scheme, you must annually invest at least INR 500 but not more than INR 1.5 lakhs to keep the account active. PPF is one of the top tax-saving investment plans available in India.  

5. Fixed Deposits (FDs) 

When it comes to tax planning, FDs are a popular option. They offer returns at a fixed interest rate. Fixed deposits have a minimum lock-in period of five years. The amount you put into the deposit can get deducted from your taxable income. However, the interest earned under the scheme is fully taxable. Fixed deposits are ideal for individuals looking for safe tax-saving investments.

6. National Savings Certificate (NSC)

National Savings Certificate or NSC is another saving scheme initiated by the Government of India. One can open an NSC account at any post office in the country. Similar to PPF, the National Saving Certificate offers guaranteed returns. Unlike the Public Provident Fund, the NSC has a lock-in period of only five years. You can avail of tax deductions on investments of up to INR 1.5 lakhs yearly. NSC also allows you to invest more since there's no maximum investment limit. It’s a great option if you have a low risk appetite and want to save on taxes while earning steady returns. 

Taxpayers have several tax-saving investment plans available. Identifying the ideal plan for your needs can seem overwhelming. Ideally, list your financial goals and understand your risk appetite before looking for investments. Identify options that can take you closer to your financial goals while maximising your annual tax savings. Start your tax planning at the beginning of every financial year. Doing so gives you enough time to make informed decisions and build up a corpus for the future.

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ARN -  ED/03/23/1342